NPCI allows charges on merchant transactions made through Prepaid Instrument wallets using UPI
- ByStartupStory | April 6, 2023
India’s National Payments Corporation (NPCI) has recently issued a circular to banks allowing them to levy charges on merchant transactions made through Prepaid Payment Instruments (PPI) wallets using UPI. The move has sparked concerns among customers that they may have to pay for their transactions made via PPI on UPI.
However, NPCI has clarified that normal bank-to-bank UPI transactions will not be charged, and customers will not have to pay for transactions made via PPI on UPI. The new interchange charges will only be applicable for PPI merchant transactions.
PPIs are payment methods that allow users to purchase goods and services and send/receive money by using the stored value in the wallet. Users have to pre-load the wallet with a desired amount, which can be loaded/reloaded against cash, debit to bank account, credit/debit cards, UPI, or any other approved payment method in India.
Previously, to use PPI at any merchant, it was necessary that the concerned merchant was engaged directly by the specific PPI issuer (specific network). All PPIs with which the merchant did not have a direct tie-up would get rejected. To overcome this limitation of PPIs, the RBI has mandated interoperability among different PPI issuers.
After linking one’s PPI wallet to UPI, customers can transact using Scan and Pay on all UPI interoperable QR codes. This will enable the use of PPI wallets at all merchant locations. A merchant with any UPI QR code can now accept payments from any PPI issuer or mobile wallet, which will speed up the growth of merchant transactions in rural areas and further deepen digital financial inclusion by catering to use cases such as healthcare, transit, education, utility bills, etc.
For using PPIs such as gift cards, wallets, etc., for transactions on UPI, an interchange fee of up to 1.1% has been levied from April 1, 2023. The charges are applicable if the transaction is more than INR 2,000. Merchants accepting UPI payments from a customer’s bank account will not be charged, but charges will be applicable only if they have accepted or consented for the transactions made using PPI Wallet.
While officially there are no charges to be paid by the customer, merchants may pass on the additional burden to customers by way of price increase or some other means. Therefore, customers are advised to be mindful of these changes while using PPIs for their transactions.
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