NPCI Circular on UPI Charges: Will Customers Be Charged?

NPCI circular on UPI charges have been released, and the National Payments Corporation of India (NPCI) has recommended a 1.1 percent interchange fee on UPI transactions of above Rs 2000 done using wallets, cards or other prepaid payment instruments (PPIs). This new rule comes into effect starting from 1 April 2023. The NPCI announced Wallet interoperability guidelines on 24 March 2023.

Will Customers Be Charged As Per NPCI Circular on UPI Charges?

NCPI has clarified that customers will not be charged, and have issued a statement regarding the same. "These Bank account-to-account transactions continue to remain free for Customers and Merchants. Recent regulatory guidelines, the Prepaid Payment Instruments (PP| Wallets) have been permitted to be part of interoperable UP ecosystem. In view of this PCI has now permitted the PPI wallets to be part of interoperable UP ecosystem. The interchange charges introduced are only applicable for the PP 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). 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," says NPCI.

What Would the New Rules Implement?

This would mean that the bank in question will earn 1.1% interchange revenue when their customers, which means the KYC wallets issued by the associate Bank, make payments on merchants acquired by other payment aggregators or banks. PayTM responded to this new development saying: "The Bank will pay 15 bps of charges for adding more than Rs 2,000 using UPI, and in turn, will also earn 15 bps when any other wallets use our bank to add more than Rs 2,000 using UPI.”

Post the announcement of the NPCI interoperability rules, Paytm Wallet has become universally acceptable on all UPI QRs and online merchants. The move has also been welcomed by other players. Rajsri Rengan, India Head of Development, Banking and Payments, FIS, said: “The new interoperability guidelines for prepaid payment instruments announced by the NPCI is a significant step towards building a more inclusive and seamless digital payments ecosystem in India. The interoperability of digital wallets and UPI can be a game-changer for the Indian fintech industry, as it opens up new opportunities for innovation, growth, and competition.”

She added: “With greater interoperability between payment systems, consumers will have more choice and flexibility in how they transact with merchants, leading to increased adoption of digital payments and ultimately driving financial inclusion and economic growth. This move will also encourage innovation in the digital payments space, fostering competition and improving the quality of services offered to consumers. We believe this is a positive development for the Indian economy and the banking system as a whole, and we look forward to continuing to support the growth and development of digital payments in India.”

NPCI Circular on UPI Charges Will Reduce Fraud

Along the same lines, Akash Sinha, co-founder and CEO, Cashfree Payment, said: “The guidelines make wallets more appealing to customers by opening up newer use cases of payments. It will eliminate the need for customers to carry multiple cards, thereby reducing fraud and theft due to the exposure of card numbers. Many merchants use wallets for accepting customer payments, for instance, at PoS. Interoperability will significantly ease collection for them since it will allow merchants to accept wallet payments regardless of the wallet being used by the customer. Further, it will eliminate the need for specific integrations with a particular wallet to accept payments on a website since customers can also pay via UPI or card infrastructure. This will increase the payment alternatives for customers. The interoperability of wallets with UPI will catalyse the progress of digital payments, enhancing the customer experience.”