Mobile wallet transactions to cost more from April 1
The fee is likely to impact users who will make payments to merchants on the UPI via wallets and will not be applicable to person-to-person transactions or person-to-merchant transactions.
MUMBAI: The payments done via wallets on Unified Payments Interface (UPI) are likely to cost more to the consumers as National Payments Corporation of India (NPCI) has recommended an interchange fee of up to 1.1 per cent on UPI transactions of over Rs 2,000 made through Prepaid Payment Instruments (PPIs).
The fee is likely to impact users who will make payments to merchants on the UPI via wallets and will not be applicable to person-to-person transactions or person-to-merchant transactions between a bank and the prepaid wallet.
An interchange fee is a fee that is charged by one bank to another bank for processing a transaction.
“Interchange shall not be applicable to P2P (peer to peer) and P2M (peer to merchant) transactions between bank account and the PPI wallet,” noted the NPCI circular.
The decision to levy fee will come into effect from April 1 and the NPCI, governing body of the UPI payment system, will review the fee on or before September 30, 2023, said the circular.
“Based on February 2023 annualised wallet payment transactions of Rs2 lakh crore, we estimate wallet loading charges could be over Rs100 crore across all wallet issuers, (assuming 30 percent of wallet transactions are eligible given transaction-size rule and an estimated 60 percent share of UPI in wallet-loading), and will be paid to banks,” Citi Research said in a note.
The popularity of UPI is growing consistently in the country to due to ease of doing transactions. Transactions via the UPI network rose 1.3 percent in January this year to Rs 13 lakh crore while the number of transactions rose by 2.6 percent to 803 crore transactions during the month, according to data by NPCI. In 2022, UPI processed over 7,400 crore transactions, worth Rs 125.94 lakh crore.