National Payments Corporation of India (NPCI) has released a circular suggesting that fees should be imposed on Prepaid Payment Instruments (PPI) for merchant transactions on Unified Payments Interface (UPI). This new rule will be effective from April 1st. The PPI fees will be levied on transactions above ₹2,000 on UPI and will result in an interchange at 1.1% of the transaction value. However, normal UPI payments and bank account to bank account-based UPI payments will not incur any charges.
This new addition to UPI allows customers to use any bank account, RuPay Credit card, and prepaid wallets on UPI-enabled apps. Issuers of prepaid instruments will also be required to pay 15 basis points of the fee to the remitter bank for loading a transaction value above ₹2,000. Notably, the fee will not be applicable to person-to-person transactions or person-to-merchant transactions between a bank and the prepaid wallet.
The purpose of imposing the interchange fee is to cover the costs of accepting, processing, and authorizing transactions, which may result in an increase in transaction costs. However, Paytm confirmed that no charges will be paid by customers for Paytm UPI transactions. The digital payment app took to Twitter to state that “No customer will pay any charges on making payments from UPI either from bank account or PPI/Paytm Wallet."
NPCI Press Release: UPI is free, fast, secure and seamless
— NPCI (@NPCI_NPCI) March 29, 2023
Every month, over 8 billion transactions are processed free for customers and merchants using bank-accounts@EconomicTimes @FinancialXpress @businessline @bsindia @livemint @moneycontrolcom @timesofindia @dilipasbe pic.twitter.com/VpsdUt5u7U
NPCI has confirmed that they will review the pricing by 30 September.
Introduction:
The National
Payments Corporation of India (NPCI) recently issued a circular suggesting that
Prepaid Payment Instruments (PPI) fees should be levied on merchant
transactions on Unified Payments Interface (UPI). This move is expected to help
cover the costs of accepting, processing, and authorizing transactions. The new
rule will be implemented from April 1st, 2023. In this article, we will discuss
the details of the new regulation and its potential impact.
What is the New Regulation?
The new
regulation suggests that PPI fees will be levied on transactions above ₹2,000
on UPI. It will result in an interchange at 1.1% of the transaction value. The
issuers of prepaid instruments will also be required to pay 15 basis points of
the fee to the remitter bank for loading a transaction value above ₹2,000.
However, no charges will be paid by customers for bank account to bank account-based
UPI payments or normal UPI payments. Notably, the fee will not be applicable to
person-to-person transactions or person-to-merchant transactions between a bank
and the prepaid wallet.
What is UPI?
Unified
Payments Interface (UPI) is an instant real-time payment system developed by
NPCI. It allows users to transfer funds between bank accounts on a mobile
platform instantly. UPI is a highly secure platform, and transactions are
authenticated by a user-generated MPIN (Mobile Personal Identification Number).
What is PPI?
Prepaid
Payment Instruments (PPI) are digital payment instruments that facilitate the
purchase of goods and services. PPIs can be issued as cards or wallets and can
be used for various transactions such as online shopping, bill payments, and
money transfers. They can be loaded with a certain amount of money, which can
then be used to make purchases or transfer money.
Impact of the New Regulation:
The new
regulation is expected to impact the cost of transactions for merchants. With
the imposition of the PPI fees, the cost of transactions above ₹2,000 on UPI is
likely to become costlier. This may result in a decline in the number of
transactions carried out on UPI, particularly for high-value transactions.
However, it is important to note that normal UPI payments and bank account to
bank account-based UPI payments will not incur any charges.
The new regulation will also enable
customers to use any bank account, RuPay Credit card, and prepaid wallets on
UPI-enabled apps. This will provide customers with more options and flexibility
when it comes to payment methods.
In Conclusion:
The
imposition of PPI fees on merchant transactions on UPI is a new regulation that
is set to come into effect on April 1st, 2023. The fee will be levied on
transactions above ₹2,000 on UPI and will result in an interchange at 1.1% of
the transaction value. The issuers of prepaid instruments will also be required
to pay 15 basis points of the fee to the remitter bank for loading a
transaction value above ₹2,000. However, normal UPI payments and bank account
to bank account-based UPI payments will not incur any charges. This new
regulation is expected to impact the cost of transactions for merchants but
will provide customers with more payment options and flexibility.