Jobaaj Stories
The Unified Payments Interface (UPI) system is undergoing some changes w.e.f. 1st April 2023, as one of the changes, is a levy of an interchange fee.
Is UPI getting costly?
The National Payments Corporation of India (NPCI) has suggested that prepaid instrument UPI transactions be subject to an interchange fee of 1.1%. The proposed charge will be on specified merchant payments above Rs 2,000.
Thus transactions worth up to Rs 2,000 will not be charged. The NPCI suggested such a levy to boost the earnings of banks and payment service providers, who are struggling to cover the high UPI costs.
Whenever a customer makes a payment to a specified merchant worth over Rs 2,000, the merchant will pay the fee to the service provider. But, customers will not be charged for the same.
Moreover, such interchange fees will not apply to peer-to-peer transactions or peer-to-peer-merchant transactions between a bank and prepaid wallets. Meaning you can send money to another account or to a mobile number, which is linked to a bank account for free.
The NPCI stated in its announcement that there are no fees for the bank account to bank account-based UPI payments (also known as standard UPI payments). Further, the interchange costs introduced are only applicable for PPI merchant transactions.
Also Read: The Journey of a CA Finalist
The Indian e-commerce market backed by a robust UPI system, which was last valued at $83 billion in 2022, is expected to grow much more as it continues to break all records. UPI transactions saw the biggest YoY growth as they surged 74.1% as of January 2023.
Moreover, cash use has declined from 71% of POS transaction value as of 2019 to 27% of POS transaction value in 2022! India has emerged as a global leader in the payments segment as India's e-commerce market is expected to reach $150 billion by 2027.
- Aman Agarwal
