NPCI adds UPI Payment for Credit Cards

What Happened and What NPCI Has Notified?

According to a recent Notification the Payments made Via Pre Paid Instruments such as Wallets and Cards will be chargeable. It will attract an interchange fee of 1.1% for Merchant Payments from 1st April 2023.The interchange fee will be charged only on certain specified transactions above INR 2000.

What type of transaction will be chargeable under this notification? Which type of UPI Payments will be covered under interchange fee?

According to the Circular dated 24th March 2023 by NPCI following types of transactions will be chargeable over INR 2000:

1. Online Merchants
2. Large Merchants
3. Small Merchants

Certain Merchant transaction through Pre Paid Payment instruments will be covered under interchange fee. The Pre Paid instruments which will be covered under this are PayTm, PhonePay, AmazonPay, MobiKwik. Example- If the User has money in PayTm or PhonePay Wallet , he goes to a shop cans QR code . If the amount of payment is more than INR 2000, interchange fee of 1.1 percent over and above transaction will be chargeable.

Do users Have to bear or pay the interchange Fee levied on such transactions? Will UPI be not Free Anymore?

Users Relax you are not getting charged for interchange fee levied on transactions above INR 2000.The interchange charges introduced are only applicable for PPI Merchant transactions . The customers or user are not getting charged. There are no charges for Bank Account to Bank Account Based Transactions.

Which type of transactions will not attract interchange fee?

The interchange fee will not be charged on Peer to Peer(P2P) Transactions or Peer to Peer Merchant Transactions (P2PM) between a Bank and Pre Paid Wallet.

What is Peer to Peer Merchant Transactions ?

Peer to Peer Merchant Transactions are classified by NPCI under small businesses having monthly inward UPI business transaction of less than INR 50,000.Hence sending money on a P2PM business account will not attract any interchange levy.

What is Interchange Fee?

Interchange fees are levied on merchant which varies from 0.5 to 1.1 percent when customers process such transactions. Example – When a customer Pays via QR Code Scanner UPI to a Shop of transaction valuing INR 2100, the Merchant will bear the interchange fee .

A Billion Dollar Question here ..Who is the Merchant who is bearing the cost of interchange fee levied?

The Merchant is the Business or Services Provider whose services the customers or user assume. The interchange charges will be deducted from Bank Account of the Merchant and not the user availing the services of the Merchant.

The Future Bone of Contradiction and Conflict.

For small value transactions the Merchant may bear the interchange fee, as mandated by NPCI for UPI Transactions. However, the bone of contention will arise when the Merchant needs to pay 1.1 percent on high value transaction where he may refuse to bear the cost .However, it is a future scenario , because Merchants also need to see their profit and loss.

The same thing may apply to recharges and payments made via UPI through Wallets or PPIs. As of no PPI will need to transfer the interchange fee of 0.15 BPS to user account , making the transactions free. However, in future they may opt to pass on these charges to users. Then it will need to be seen how NPCI handles the situation.

As of now user don’t need to worry and just do their regular cashless transaction via UPI freely and happily without bothering about interchange fee.