Surcharge on UPI Transactions via PPIs

The National Payments Corporation of India (NPCI) recently released a circular in which it recommended a 1.1 percent interchange fee on certain merchant UPI transactions above Rs 2,000, made using prepaid payment instruments (PPI) like online wallets.

As per the circular issued on March 24, the changes will come into effect from April 1, 2023, and the above pricing will be reviewed on or before September 30, 2023.

No impact on customers

But as per the NPCI’s circular, the interchange fee of 1.1 percent will have no impact on the end customer and UPI transactions will remain free for them.

NPCI said in its circular that Peer-2-Peer (P2P) and Peer-2-Merchant (P2PM) transactions between a bank account and a PPI will not require an interchange fee.

Essentially, this fee will only apply to digital wallet transactions made via merchant QR codes, which are likely to be paid by the merchant acquirer to the wallet issuer. Therefore, neither the merchant nor the customer is directly impacted by the interchange fee.