The changes take effect from April 1, according to a circular by NPCI dated March 24.
The circular is not in the public domain yet. ET has reviewed a copy of the circular.
An interchange fee is a cost paid for accepting and processing online transactions.
While the 1.1% broad interchange is applicable to transactions over Rs 2,000 in value, NPCI has set different merchant fee structures for PPI payments on UPI, varying as per the industry.
Some merchant categories across the agriculture and telecom sectors are also subject to a lower interchange fee.
Discover the stories of your interest
“Interchange shall not be applicable to P2P (peer to peer) and P2M (peer to merchant) transactions between “bank account and the PPI wallet,” according to the NPCI circular.Payment firms including Paytm who received the circular last week quickly implemented full interoperability and have allowed their customers to pay UPI quick response (QR) codes through their mobile wallets.
NPCI operates the UPI payment railroad.
The issuer of a PPI should pay 15 bps (basis points) as wallet loading service charge to the remitter bank (account holder’s bank) for loading transaction value greater than Rs 2,000.
This is if users make use of UPI to load their wallets through their bank accounts.
CNBC TV-18 was the first to report about NPCI bringing in an interchange fee for PPI transactions on UPI.
Several fintech firms have missed the Reserve Bank of India (RBI’s) deadline to comply with the ‘PPI interoperability’ guidelines due to non-clarity on the interchange. The RBI had set a deadline of March 31 last year to comply with the new guidelines.
The confusion was because UPI followed a zero-merchant discount rate (MDR) model. The latest pricing is expected to be reviewed on or before September 30, NPCI said in the circular.
The new interchange structure comes as a slight relief for UPI players such as PhonePe and Google Pay, who have been struggling to make revenues on the payment network, even as they continue to grow the payment acceptance infrastructure in the country.
However, whether the PPI payments use-case will take off on UPI is not clear yet.
“At present, there is no incentive for a user to use their wallet over their bank account to make a UPI payment. Rather, there is an extra friction layer of loading the wallet, which UPI was solving for while competing with digital wallets,” said the founder of a fintech firm who didn’t want to be named.
Finance minister Nirmala Sitharaman had put in place the zero MDR regime for UPI and RuPay debit card transactions starting December 2019 in order to make digital payments widely acceptable.
For all the latest Technology News Click Here
