Shillong, March 29: The National Payments Corporation of India (NPCI) has recommended an interchange fee on Unified Payments Interface (UPI) transactions of more than Rs 2,000 made using Prepaid Payment Instruments (PPIs).
In order to increase revenue for banks and payment service providers, which have been battling with the high cost of UPI transactions, an interchange fee of up to 1.1% has been recommended by NCPI. By September 30, 2023, the interchange pricing will be reviewed after which it may come into force.
As per a circular issued by NCPI the changes will come into effect from April 1, 2023 and the pricing will be reviewed on or before September 30 this year.
In India, UPI is currently the most popular and widely utilised payment method for customers to immediately transfer money between bank accounts via their smart phones. In contrast, PPIs are online wallets that let users save money and send payments. In India, PPIs like Paytm, and PhonePe among others are available.
An interchange fee is a cost incurred by one bank while executing a transaction with another bank. The bank of the merchant pays the bank of the payer the interchange fee in the event of UPI transactions.
The majority of UPI transactions at present involve small amount. The NPCI contends that by rewarding PPI companies for promoting UPI transactions for larger sums, the average transaction value of UPI transactions can rise and the overall cost of India’s payment systems can be brought down.