Any Unified Payments Interface (UPI) transaction of more than Rs 2,000 via prepaid payment instruments (PPI) like online wallets or pre-loaded gift cards, etc., will carry an interchange fee of up to 1.1 percent from April 1, 2023. The interchange fee is typically associated with card payments and is levied to cover the costs of accepting, processing, and authorising transactions.

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While digital platforms such as Cashfree Payments, Spice Money have hailed the move, consumers might have several queries regarding this. Here's an FAQ answering all those queries:

Will customers be charged for UPI payments?

No. The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for the bank account to bank account-based UPI payments (i.e. normal UPI payments), NPCI made it clear in a circular.

So, how will consumers benefit?

With this addition to UPI, customers will have the choice of using any bank account, RuPay Credit card, and prepaid wallet on UPI-enabled apps.

"The NPCI circular will make wallets more appealing to customers by opening up newer use cases of payments. It will eliminate the need for customers to carry multiple cards, thereby reducing fraud and theft due to the exposure of card numbers," said Akash Sinha, Co-founder & CEO at Cashfree Payments.

How will merchants benefit?

Many merchants use wallets for accepting customer payments, for instance, at PoS. Interoperability will significantly ease collection for them since it will allow merchants to accept wallet payments regardless of the wallet being used by the customer.

"Further, it will eliminate the need for specific integrations with a particular wallet to accept payments on a website since customers can also pay via UPI or card infrastructure. This will increase the payment alternatives for customers. The interoperability of wallets with UPI will catalyse the progress of digital payments, enhancing the customer experience," Sinha told CNBC-TV18.com.

Echoing similar views, Ashwin Chawwla, CEO & Founder at Escrowpay, said that this decision is expected to bring in much-needed revenue for payment service providers, who have been struggling to maintain profitability due to the low transaction fees on UPI transactions.

"The increased charges on high-value UPI transactions are also expected to encourage merchants to adopt other payment modes, such as credit and debit cards, which have higher transaction fees. This will diversify the payments ecosystem and reduce the dependence on UPI for all transactions. With the introduction of a charge on high-value transactions, merchants are likely to adopt UPI for all transactions, which will further increase the adoption of digital payments," Chawwla told CNBC-TV18.com.

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First Published:Mar 29, 2023 12:33 PM IST