New fees on UPI payments

Facts for Prelims (FFP)

Source: TOI, LM

Context: The National Payments Corporation of India (NPCI) has allowed prepaid payment instruments (PPIs) to be part of the interoperable Unified Payments Interface (UPI) ecosystem.

What does the new guideline say?

• The new guidelines, effective from April 1st, levy a 1.1% charge on UPI transactions above ₹2,000 while using PPIs.
• The charges are only applicable for PPI merchant transactions, and there are no charges for the bank account to bank account-based UPI payments.

Explanation using an example:

A PPI payment via UPI means a transaction done via a wallet, like PhonePe Wallet through a UPI QR code. This means that if users have money in their say PhonePe Wallet and want to make a payment via the merchant’s UPI QR code, then on transactions above Rs 2,000, an interchange fee of up to 1.1% will be levied. This fee is charged to the merchant and not the customer.

Benefit:

• The move is expected to help UPI merchants, who can accept wallet payments regardless of the wallet being used by the customer, thereby increasing payment alternatives for customers.
• The interoperability of KYC wallets will also eliminate the need for customers to carry multiple cards and reduce fraud and theft.