Recently, a headline regarding UPI payments took all of us by surprise. From April 1, there will be a 1.1% fee imposed on transactions above ₹2,000. However, we did not who will pay the extra amount.
If you have been told that you, as a customer, would be paying the fee, you have been misled. The National Payment Corporation of India (NPCI) shared on Twitter that no charges will be applied to customers using the online transaction to pay while buying clothes, groceries or anything else.
Truth Behind Fee On UPI Transactions
According to the new guidelines, interchange charges are applicable for Prepaid Payment Instruments (PPI). Hence, whatever transactions will happen via credit cards, wallets (PhonePe, Amazon, Paytm, SODEXO, MobiKwik) etc. will be charged 1.1% of the amount.
What many people do not know is that there will be no charges imposed for the bank to bank transfer using UPI payments. The tweet read, “With this addition to UPI, the customers will have a choice of using any bank accounts, Rupay Credit card and prepaid wallets on UPI-enabled apps.”
NPCI has also been posting, “UPI is free, fast, secure and seamless. Every month, over 8 billion transactions and processed free for customers and merchants using bank accounts.”
Will You Be Charged For Sending Money To Friends and Family?
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No. The fee will not be imposed on transactions between two peers (P2P Transactions) or peer-to-peer-merchant (P2PM) transactions between a bank and the prepaid wallet.
P2PM is a classification by NPCI for small businesses, which receive more than or equal to ₹50,000 in a month via UPI transactions. Therefore, if you send money to family, friends or a small business merchant’s bank account, you will not have to pay any extra fee.
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What Is The Interchange Fee Amount?
The amount will vary from 0.5% to 1.1% of the money transferred. About 0.5% will be levied on education, fuel, utility payments and agriculture. Retail outlets and convenience stores will be charged 1.1%.
Shopkeepers that fall in the medium category will have to bear the cost if transactions a day exceed ₹2,000. It will surely have a huge impact on merchants whose daily transactions are high.
The Economics Times quoted Karan Mehta, CTO at RING, "UPI has now become a mature product in India, and an MDR was inevitable to have a sustainable revenue model for the entire digital ecosystem. We do anticipate some friction at the merchant’s end in providing UPI as a service to all customers, limiting the usage. Having said that, this will encourage more participation from the banking sector in UPI as a service if there is a revenue model put in place."
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Will It Benefit UPI Transaction Providers?
NPCI Press Release: UPI is free, fast, secure and seamless
— NPCI (@NPCI_NPCI) March 29, 2023
Every month, over 8 billion transactions are processed free for customers and merchants using bank-accounts@EconomicTimes@FinancialXpress@businessline@bsindia@livemint@moneycontrolcom@timesofindia@dilipasbepic.twitter.com/VpsdUt5u7U
It will help to increase the money flow for service providers. The Economic Times spoke to Ashwin Chawwla, Founder and Managing Director of Escrowpay, who said that since the service providers have been struggling to make profits due to the low-transaction fees on UPI transactions, it will help them to increase their revenue.
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