As Per An NPCI Report, “An Interchange Fee Of 1.1% Will Be Levied For UPI Payments”– Things You Should Know

Blockchain Firm
4 min readApr 11, 2023

We hope that you all have heard the news that the National Payments Corporation of India (NPCI) has proposed that UPI transactions made through prepaid tools, like digital wallets, will have a trade-off fee of 1.1% for certain trader payments. However, this plan is valid from the 1st of April, 2023. As per the circular by NPCI, “The cited 1.1 percent interchange fee will be charged only for merchant payments above Rs.2,000, not below this price range.”

People Prefer Online Payment Methods

Online payments are the widely used “go-to” payment methods of the present day. Those who hate visiting banks often to deposit or withdraw money can get more convenience with digital payment modes. It is so obvious that everyone prefers digital wallet transactions for shopping from e-Commerce stores, paying electricity/recharge bills, reimbursing loans, paying college fees, and more.

First of all, isn’t it amazing to perform all banking transactions and operations simply using your smartphone? Moreover, it has more benefits than traditional banks, right? The current and upcoming digital wallets focus on adding powerful security features to ensure protection from cyber attacks.

Let us decode how this report will affect merchant payments from the beginning of April 2023.

Synopsis of The News About the UPI Interchange Fee

Consider that you have a friend living in another state. On a special occasion, you want to send them money via UPI. In this situation, will it be fair if you are asked to pay the interchange fee?

Definitely NOT!

As per the statement by NPCI, it is clear that there is no interchange fee deduction for P2P and P2PM transactions.

(Note- P2PM is a Peer-to-peer-merchant payment used by small businesses having monthly UPI transactions less than or equal to 50k rupees.)

Frequently Asked Questions About Interchange Fees

Where Is this interchange fee applicable?

The interchange fee is applicable only for merchant transactions performed using PPI instruments. The PPI (Prepaid Payment Instruments) includes wallets, smart cards, magnetized chips, and vouchers; for example, Paytm, Google Pay, Amazon Pay, and MobiKwik wallets.

Let us explain this using a scenario where you are making a Paytm wallet transaction in a shop by scanning the QR code. So, if the bill amount is above 2000, then you should pay the interchange fee.

Also Read : Crypto Wallet Transactions & Its Benefits

Who Will Pay The Interchange Fee?

The merchant should pay the interchange fees whenever a consumer process a payment. For any transaction made via a wallet, say Paytm wallet, the merchant will have to pay the interchange fee to the payment processor. For a better understanding, you can consider this fee similar to the merchant discount rate (MDR) applied to credit card transactions. Therefore, REGULAR USERS NEED NOT PAY THE INTERCHANGE FEE.

We hope you got the point!

However, the interchange fee will range between 0.5% to 1.1 %, depending on the merchant classification principles. For the categories like education, agriculture, fuel, and utility transactions, a 0.5 percent interchange fee will be charged. On the other hand, amenity shops and retail markets will have to pay 1.1 percent of the interchange fee.

How Will This Impact Small Merchants?

Small businesses won’t be having any negative impacts as the interchange fees do not apply to them. Medium-sized businesses will have to pay this price only for transactions above INR 2,000.

Recent Notice By NPCI

In a recent statement, NPCI explained that the transactions between bank accounts will be free of cost for customers and vendors like they used to be before. They further highlighted, “Interchange fee is valid for only UPI transactions via PPI wallets.” Also, NPCI has now allowed the PPI wallets to play a part in the interoperable UPI ecosystem.

UPI In India Has Matured A Lot!

That’s for sure!

UPI payments have grown and have been adopted widely in India. However, MDR is unavoidable when it comes to a digital payment ecosystem. So, they are some dissatisfaction from the merchant’s end. This may lead to a reduction in the adoption rate of UPI payment methods for retailers. Simultaneously, banking operations via UPI will increase among customers.

An Alternative Yet Powerful Transaction Mode

UPI transactions are helpful to boost access to banking services globally. Somehow, it affects the merchants with the recent NPCI announcement. Due to this situation, we can expect the introduction and adoption of the Digital Rupee (e-rupee). This will offer many benefits to crypto-based transactions, such as intermediary-less cross-border transactions, no verification costs, instant payments, cryptography-backed security, and more. The best part is that both customers and merchants will have a win-win situation in the end.

Thus, we can expect the transition from UPI payments to crypto payments in a few years. The question is, when? If this happens, you will need a blockchain wallet to be a part of the ecosystem. Get the best cryptocurrency wallet development services from Blockchain Firm.

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Hey Blockchain enthusiasts!

We hope this blog helps you gain knowledge about the ongoing UPI announcement released by NPCI. You can share it with your known circle who might be interested in this topic. You can also leave your feedback and comments below!

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Blockchain Firm

Blockchain Firm is a sustainable Blockchain Development Services Company in UAE & India.