NCPI Transaction Fee Adjustment - UPI payments will incur fees, how will this affect you? :- www.deekpay.com

From 1 April 2023, some UPI transactions will start charging fees, as you may have already heard. In this article, we will explain in detail the latest NPCI notification on UPI transaction charges.

What is the content of NPCI's notification on UPI transaction charges?

The National Payments Corporation of India (NPCI) has announced that it will charge a transaction fee of up to 1.11 TP3T for UPI transactions made using prepaid payment instruments (PPIs). This applies to prepaid transactions made through UPI for amounts above Rs 2,000 across all categories of merchants. However, this decision mainly affects small, medium and large merchants who accept high-value transactions.

Transaction handling charges vary depending on the merchant category and range between TP3T 0.51 and TP3T 1.11. Categories such as Agriculture, Education, Fuel and Utilities will charge a handling fee of 0.51 TP3T, while categories such as Speciality Retail and Convenience Stores will charge a handling fee of 1.11 TP3T.

What are transaction fees?

A transaction fee is a fee that a merchant must pay when a consumer transacts using a digital payment method. It is similar to the merchant discount rate applied to credit card transactions.

Who will it affect?

Normally, the transaction charges are borne by the merchant. Assuming that a consumer uses a digital wallet to purchase goods worth more than Rs 2,000 from you through UPI, you will have to pay a processing fee to the payment service provider for this transaction.

Transaction Type | Transaction Fee | Example

— | — | —

PPI to merchants through UPI | Below Rs 2,000 - Nil | Consumers pay more than Rs 2,000 for purchases through UPI using Paytm wallet

P2P (Person-to-Person) | None | Consumer transfers money to another consumer via UPI

Consumer to Merchant | None | Consumer pays any amount to merchant for purchases made through UPI

Bank to Personal/Merchant Bank | None | Consumer transfers from bank account to personal/merchant bank account via UPI

Consumers will only be affected if traders or PPI decide to pass on the extra costs to them.

Do I incur fees to top up my digital wallet?

PPI issuers will have to pay a fee of 15 basis points to remittance banks for recharging digital wallets with amounts above Rs 2,000. Consumers and merchants using UPI's digital wallets currently do not have to bear this cost. If the payment service provider decides to pass on this cost to the user, then recharging the wallet will become a chargeable service.

How does this help payment service providers?

Typically, UPI transactions generate very little or almost no revenue. The decision to charge fees for some UPI transactions will provide the necessary boost by generating additional revenue for payment service providers.

We will be closely monitoring the decision to charge some UPI transactions. Watch this space for more updates.