NPCI suggests 1.1 percent interchange fee on PPI-based UPI transactions, full details

Starting from April 1, the National Payments Corporation of India (NPCI) will impose an interchange fee of up to 1.1 per cent on Unified Payments Interface (UPI) transactions conducted with prepaid payment instruments (PPIs) such as wallets or cards. This charge will apply to online merchants, large merchants, and small offline merchants for UPI payments exceeding INR 2,000. However, some merchant categories may be subject to a lower interchange rate starting from 0.5 per cent in line with applicable caps, according to the NPCI. The organization added that the interchange fee will not apply to P2P and P2PM transactions between bank accounts and PPI wallets. However, PPI issuers will need to pay a “wallet loading service charge” of 15 basis points (bps) to the remitter bank when loading over INR 2,000 into the prepaid wallet. The NPCI will review the interchange pricing by September 30, 2023, according to its circular.

Citibank Research estimates that wallet loading fees across all wallet issuers could exceed INR 100 crore based on wallet payment transactions of INR 2 lakh crore in February 2023. Additionally, Paytm Payments Bank, which has over 10 crore users, stated that its wallets will be accepted on all UPI QRs and online merchants with interoperability enabled.

Additionally, it will profit from interchange fees on payments made through the Paytm wallet to businesses that have been purchased by other payment service providers, payment gateways, and payment aggregators. The bank will pay 15 bps of charges for adding more than INR 2,000 and earn the same amount when other wallets use the bank to add more than INR 2,000 using UPI.

Additionally, by prominently displaying the UPI payment option by September 30, 2023, UPI service providers and merchants are encouraged by NPCI to improve interoperability. The interoperability of wallets with UPI is expected to increase the role, appeal, and use cases of wallets, which can now be used on approximately 25 crore QR codes as of February 2023. This move is also anticipated to expand payment alternatives for customers as they can now pay via UPI or cards. Many merchants accept wallet payments, such as at point of sale, and interoperability will make it simpler for them to collect payments regardless of the wallet used by the customer, according to Akash Sinha, CEO and co-founder of Cashfree Payments.

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