MUMBAI: There will be no impact on customers doing transactions via wallets on Unified Payments Interface (UPI) due to an interchange fee of up to 1.1 per cent on UPI transactions, said National Payments Corporation of India (NPCI).
The 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 interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for the bank account to bank account-based UPI payments (i.e. normal UPI payments)," said NPCI in a statement on Wednesday.
"With this addition to UPI, the customers will have the choice of using any bank accounts, RuPay Credit card and prepaid wallets on UPI-enabled apps," it added.
An interchange fee is a fee that is charged by one bank to another bank for processing a transaction.
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Traditionally, the most preferred method of UPI transactions is linking the bank account in any UPI-enabled app for making payments which contributes over 99.9% of total UPI transactions. "These bank account-to-account transactions continue to remain free for customers and merchants," said NPCI.
The decision to levy the 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 Rs 2 lakh crore, we estimate wallet loading charges could be over Rs100 crore across all wallet issuers, (assuming 30 per cent of wallet transactions are eligible given transaction-size rule and an estimated 60 per cent 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 due to the ease of doing transactions. Transactions via the UPI network rose 1.3 per cent in January this year to Rs 13 lakh crore while the number of transactions rose by 2.6 per cent 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.