WHILE there is a lot of confusion in the market on whether users will have to bear an extra cost next time they make an online transaction using Gpay, Paytm or any other apps, the National Payments Corporation of India (NPCI) has issued a clarification on this matter.
In a press release dated March 29, 2023, NPCI said that Unified Payments Interface (UPI) offers a free, fast, secure and seamless experience.
According to NPCI, these Bank account-to-account transactions continue to remain free for Customers and Merchants.
NPCI has now allowed the Prepaid Payment Instruments (PPI Wallets) to be part of an interoperable UPI ecosystem. The governing body of the UPI payment system clarified that the interchange charges introduced are only applicable to the PPI merchant transactions and there is no charge to customers. The NPCI added that there are no charges for the bank account to bank account-based UPI payments (i.e. normal UPI payments).
Traditionally, the most preferred method of UPI transactions is linking the Bank account in any UPI-enabled app for making transactions contributing over 99.9% of total UPI transactions.
With the new changes, customers will now have the option to use any bank account, RuPay Credit card and prepaid wallet on UPI-enabled apps.
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The NPCI’s clarification came after various news reports claimed that merchant transactions above Rs. 2,000 done on the UPI network will attract an interchange fee of 1.1% from April 1, 2023.
It was claimed that the move was likely to impact consumers making payments through PPI such as Google Pay, Paytm and other such apps.
The NPCI which is responsible for creating a robust Payment & Settlement Infrastructure in India is the governing body of the Unified Payment Interface (UPI). The interchange fee wherever applicable usually covers the costs of accepting, processing, and authorising transactions.
No impact on customers:
According to NPCI’s circular dated March 24, the interchange fee of 1.1% will not have any impact on the end customer and UPI transactions will continue to be free for them.
NPCI has reportedly said in its circular that Peer-2-Peer transactions and Peer-2-Merchant transactions between a bank account and a PPI will not attract an interchange fee.
Essentially, this fee will only be applicable to digital wallet transactions done through merchant QR codes, which are expected to be paid by the merchant acquirer to the wallet issuer. Thus, neither the merchant nor the customer will be directly affected by the interchange fee.