Will online payments become costlier? NPCI recommends this…
NPCI released a circular on matter related to charging interchange fees on certain transactions made through UPI.
Online payment is set to become costlier after the National Payments Corporation of India (NPCI), in a notice, suggested charging interchange fees on merchant transactions made through Unified Payments Interface (UPI) using prepaid instruments such as wallet or cards. According to the circular, as reported by Live Mint, the 'Prepaid Payment Instrument' (PPI) fees of up to 1.1% will be levied on transactions above ₹2,000.
The interchange fee is usually levied to cover the cost of accepting, processing and authorising the transaction. The new rule will come into effect from April 1 and is applicable on transactions made to online merchants, larges merchants and small offline merchants. However, the surcharge will not be applicable to person-to-person and person-to-merchant transactions between bank and prepaid wallet.
Few merchants such as fuel service stations will be eligible for lower interchange fees on UPI payments to 0.5%. The pricing will be reviewed by NPCI on September 30.
Will it make online transactions costlier?
The interchange fees will be paid by merchants to wallets and it will be applicable for transactions over ₹2,000. Therefore, small merchants and shopkeepers are not likely to be impacted. However, the surcharge levied from merchants will in turn be absorbed from customers.
As the government believes UPI is for ‘public good’, it is unlikely that there will be a transaction fee for bank-to-bank UPI transactions and all merchant transactions. Loading wallets for UPI transactions with over ₹2,000 could cost more if the wallet issuers pass on the interchange fees to the customers.