Ppi Charges For Merchant Transactions Via Upi Will Enable Users …

Starting April 1, any UPI transactions of more than Rs 2,000 made via prepaid payment instruments (PPI) like online wallets or pre-loaded gift cards, etc, will carry an interchange fee.

The interchange fee is the fee to be paid to wallet issuers like banks, payment banks, etc by payment service providers like Paytm, Phonepe, Google Pay, etc. to cover the costs of accepting, processing, and authorising transactions. The fee will not be applicable for person-to-person transactions or person-to-merchant transactions between a bank and the prepaid wallet. This means you don’t have to pay any additional fees for using UPI yet.

For UPI transactions of over Rs 2,000 made via PPI, there would be an interchange fee of 1.1 percent and then there will be wallet loading charges. So the issuer of pre-paid instruments like Paytm or Ola Financial Services etc will have to pay 15 basis points as wallet loading charges to the remitter bank, i.e. the account holder’s bank if more than Rs 2,000 is loaded. National Payments Corporation of India (NPCI) has specified that interchange rates will vary depending on the profile of the merchants.

For specific industries, charges range from 0.50 percent of the transaction value to 1.10 percent. For example, UPI payments made to fuel service stations using a prepaid instrument will carry an interchange of 0.5 percent, for education fees paid using UPI, the charge will be 0.70 percent capped at Rs 15 per transaction…and so on. NPCI however has said that this pricing will be reviewed on or before September 30 this year.

To illustrate: If I have an ICICI Bank account and use a Paytm wallet. Now if I load Rs 5,000 to my wallet from my bank, Paytm will have to pay 15 basis points as wallet loading fee to ICICI Bank. Let’s say I now go to a retailer to buy a laptop using UPI via my Paytm wallet.

So the bank or payment provider who acquired the retailer as a merchant on their platform- like Axis Bank or Google Pay or whoever- will have to pay 1.1 percent as an interchange fee to Paytm wallet for facilitating the transaction. Experts believe this could be the first step; and that we may see interchanges being announced on other modes of payments as well, which would be positive for card companies etc. Sanjeev Kumar, co-founder, and CEO of Spice Money welcomed the move and added that the company will leverage the wallet business to onboard digital consumers in rural India.

“At present, there is no charge to a consumer, but at some point in time somewhere the charges will get neutralised. The question is where it goes in the value chain, which is something that we will see. For Spice money, we see this as a very encouraging opportunity because we see the wallet as a very powerful instrument that we can leverage and use to onboard a digital consumer in rural India.

So a measure like this has put a business model to the entire wallet business for players like us. So we are very encouraged by this move,” Kumar said. According to G Padmanabhan, former executive director of RBI, the measure will act as a point of competition in the short term, but ultimately the cost will be passed on to customers going ahead.

“I expect the higher costs to be passed on to customers at some point in time. For some time it could play out as a point of competition, but ultimately the cost does get passed on,” Padmanabhan said. Upasana Taku, co-founder of MobiKwik believes more players will deploy wallet and UPI interoperable QR codes, thereby providing more convenience and access to customers.

“This is a fantastic move, a step in the right direction by the regulator.

This will enable more users and more merchants in smaller towns in India to have access to digital payments.

The final evolution of the pricing models etc will happen over the course of time, but what is going to be more important is that you will see more players including MobiKwik deploying these wallets and UPI interoperable QR codes and by virtue of that it will provide more convenience and access to customers,” Taku said.

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