From April 1, 2023, an interchange fee of 1.1% will be charged for any UPI transactions of more than Rs 2,000, performed using prepaid payment instruments (PPIs), such as online wallets or pre-loaded gift cards, etc. For wallet-loading transactions worth more than Rs 2,000, the PPI issuer must pay the remitter bank 15 bps as a service fee. There will be no charge on your small-ticket purchases or private money transfer using UPI for P2P or P2M transactions.
"Interchange at the rate of 1.1% of the transaction amount shall apply to payments made to all online merchants, large merchants, and small offline merchants having transaction amounts greater than Rs. 2,000", said NPCI.
According to the National Payments Corporation of India (NPCI), interchange rates would alter based on the characteristics of the merchants. Charges for some industries range from 0.50% to 1.10% of the transaction value.
Person-to-person [P2P] or person-to-merchant [P2M] transactions between a bank and the prepaid wallet won't be subject to the fee. So for you, there aren't any additional costs associated with adopting UPI at this time. With credit cards, the customers may or may not be charged for the transactions; either way, the costs associated with the transaction will be split among the various payment stakeholders.
The interchange fee is the sum that payment service providers, such as Paytm, Phonepe, and Google Pay, must pay to wallet issuers, such as banks and payment banks, in order to defray the cost of accepting, processing, and authorizing transactions.
Bps or "bips," stands for Basis points is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form.
"Prepaid payment instruments" are ways to make purchases of products and services using the money that has been pre-loaded on them. The value or sum stored on these prepaid instruments is the value or sum that the holder has paid for with cash, a debit from a bank account, or a credit card.
Smart cards, magnetic stripe cards, online wallets, mobile wallets, paper vouchers, and other devices used to access prepaid funds are all examples of prepaid instruments that can be issued.
Peer-to-peer payment is a quick way to transfer funds between two people/parties. Online or mobile P2P payment services are connected to a bank account, credit card, or debit card. Although some types of transactions may incur a fee, P2P payment platforms are sometimes free to use.
P2M transactions in UPI refer to person-to-merchant transactions, which involve the transfer of funds from a UPI-enabled bank account to a merchant's UPI-enabled account. This type of transaction allows individuals to make payments to merchants for goods and services they have purchased using their UPI-enabled mobile banking app or other UPI payment apps.
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