The National Payments Corporation of India (NPCI) recently announced that starting on April 1, merchant Unified Payments Interface (UPI) transactions will be subject to an additional interchange fee of up to 1.1%. These fees apply to any transactions made with prepaid payment instruments (PPIs), such as wallets or cards, that total more than Rs 2,000.
The interchange fee will be charged on UPI payments made to small and large offline and online retailers alike. Yet not every transaction will be subject to the same surcharge. The interchange fee range that may be assessed in accordance with applicable caps has been provided by the NPCI for several merchant categories.
The charge made by the receiving bank or payment service provider to the merchant is known as an interchange fee. It is imposed to cover the costs of transaction authorization, processing, and accepting.
To improve the revenue of banks and payment service providers, who have been struggling due to the high cost of UPI transactions, these types of charges are being implemented.
Mihir Gandhi, Partner & Leader - Of payment Transformation, at PwC India, Said, “This is a step in the right direction to make the UPI pricing market-driven and competitive to incentivize the UPI players to recover costs and make additional investments as required. Further, the interoperability among PPIs via UPI will make PPIs more attractive for various use cases and ultimately increase the number of digital payment transactions.”
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