NPCI on UPI transactions clarifies users won't get charged for PPI interchange starting April 1

Digital Desk: From April 1, 2023, any Unified Payments Interface (UPI) transaction of more than Rs 2,000 using prepaid payment instruments (PPI) such as online wallets or pre-loaded gift cards, etc., would incur an interchange fee of up to 1.1 percent.

As to be mentioned, the interchange charge is commonly connected with credit card payments and is assessed to cover the costs of accepting processing, and authorising transactions. 

While digital services such as Cashfree Payments and Spice Money have applauded the idea, customers may have a few questions about it.

The answer to this query is no. The interchange charges introduced are only applicable for PPI merchant transactions, and there is no price to customers. It is also clarified that there are no charges for the bank account to bank account-based UPI payments (i.e. standard UPI payments), as stated in a circular issued by the (National Payments Corporation of India) NPCI. 

Customers will be able to use any bank account, RuPay Credit card, or prepaid wallet on UPI-enabled apps with this enhancement to UPI.

"The NPCI circular will make wallets more enticing to customers by expanding payment use cases. Customers would no longer need to carry numerous cards, minimising fraud and theft caused by the exposing of card numbers" Cashfree Payments co-founder and CEO Akash Sinha remarked. 

Several merchants, for example, utilise wallets to take customer payments at point-of-sale (PoS). Interoperability will make collection much easier for businesses because it will allow merchants to accept wallet payments regardless of the wallet used by the customer.

"Moreover, because users can pay via UPI or card infrastructure, there will be no requirement for unique integrations with a single wallet to accept payments on a website. Customers will have more payment options as a result of this. The compatibility of wallets with UPI would accelerate the advancement of digital payments while improving the consumer experience "Sinha stated while on an interview with CNBC-TV18.com. 

Similar to others, Ashwin Chawwla, CEO & Founder of Escrowpay, stated that this decision is expected to bring in much-needed money for payment service providers, who have been battling to sustain profitability due to low transaction fees on UPI transactions.

Chawwla further continued to inform that "The higher fees for high-value UPI transactions are also likely to encourage merchants to use alternative payment methods, such as credit and debit cards, which have higher transaction fees. This diversifies the payments environment and lessens reliance on UPI for all transactions. With the introduction of a charge on high-value transactions, merchants are likely to implement UPI for all transactions, increasing the adoption of digital payments even further."