šÆ Will UPI Payments Now Cost More?
Confused about the new charges added to UPI? Weāre here to decode them for you. ReadOn!
Panic, fear and confusion.
These were the reactions of people after the NPCI announced new charges on UPI.
People started thinking that UPI would no longer be free.
Were you one of them?
Worry not, UPI is still free for you!
So, what is happening? And does this announcement impact us at all?Ā
Sit tight, and read on as we decode it all for you.
Sit tight as we decode it all for you.
š¤ What are the New UPI Charges?
The NPCI has introduced two new charges on UPI: interchange fee and wallet loading charges.
Weāll look at both one by one.
What is interchange fee?
Interchange fee is like the toll booth on the highway of digital payments.
Merchants have to pay these fees to accept digital payments.
Interchange fee is charged by an issuing entity, the institution which has issued the cards or the PPI instrument that you are using.
For instance, if youāre using a Visa card to make payments at a store, the store owner will have to pay an interchange fee to Visa for facilitating the transaction.
Now letās look at the actual charges applicable.
A 0.5-1.1% (depending on the different merchant category) interchange fee will be applicable on UPI transactions above Rs. 2,000 only if you use a prepaid payments instrument or PPI (Hereās what PPI means).Ā
Letās simplify.
If you pay for a shirt worth Rs. 2,000 by directly transferring the amount from your bank using UPI, there will be no interchange fee for the store owner.
But if you pay for the same using a Paytm wallet or an Amazon Pay wallet (which are prepaid payment instruments), then the interchange fee comes into play.
There is still some confusion around who will bear the interchange fee: the merchant or the merchant acquirer.Ā
The merchant is the shopkeeper from whom you buy goods, and the merchant acquirer is the company that has provided the merchant with a QR code or scanner (like Paytm or PhonePe).
So, thatās one charge covered.
Now, letās look at the second charge: wallet loading fees.
As the name suggests, this fee is charged while loading digital wallets or prepaid payments instruments.
Again, worry not. You wonāt have to pay anything.
If you transfer Rs. 2,000 from your HDFC bank account to your Paytm wallet, Paytm (wallet issuer) will have to pay 0.15% of the transaction amount to HDFC bank.
Why this charge?
You see, since digital wallets have been introduced, banks have been seeing a decline in user depositsĀ available to them.
Letās say you have Rs. 25,000 in your account. And you transferred Rs. 10,000 to your Paytm wallet. The bank now has Rs. 10,000 less. It could have given this money out as a loan and earned more money.Ā
But this could cost wallet issuers over Rs. 100 crores.
So, now that you know the charges that NPCI has introduced, letās look at how they can impact us.
šThe Impact of the New Charges on Us?
Well, nobody wants to pay extra charges, whether it be merchants or merchant acquirers.
So, if these extra charges are passed on to them, they might further pass it on to us.
Some merchants could also stop accepting UPI payments.
But again, thereās no need to panic. Because very few people actually use PPI wallets for UPI payments, they may have to pay very little interchange fees, if at all.
All in all, you can stay calm and keep using UPI as you did!
But what are your views on this announcement that has led to so much confusion and even misinformation? Let us know in the comments!
Share this with your friends via WhatsApp and help them grow! See you tomorrow :)
If you are coming here for the very first time: Donāt forget to join us on WhatsApp to get daily updates! š