A new interchange fee would be charged for PPI merchant purchases, according to the National Payments Corporation of India (NPCI), which oversees UPI.
Prepaid Payment Instruments (PPIs) are payment methods that allow you to transfer and receive money using the wallet’s stored value while also making purchases of goods and services. The wallet must be pre-loaded by users with the intended amount.
From April 1, 2023, an interchange fee of up to 1.1% will be charged for purchases made on UPI using prepaid payment instruments (PPIs), such as gift cards, wallets, and so on. If the purchase is for more than $2,000, fees will apply.
Points to Ponder:
In a letter circulated to banks, the National Payments Corporation of India (NPCI) authorized them to impose fees on merchant transactions made using prepaid instrument wallets that use UPI.
Prepaid Payment Instruments (PPIs) are payment methods that allow you to transfer and receive money using the wallet’s stored value while also making purchases of goods and services.
Customers were previously limited to using the funds in their mobile wallets only at particular merchant locations that took the same PPI wallet provider. To get around this restriction, the RBI required interoperability among PPI issuers, and PPI issuers partnered with NPCI for the creation of interoperable wallets on UPI rails or the issuance of interoperable RuPay PPI cards.
For instance, you could only use a Paytm or Mobikwik wallet at retailers who recognized Paytm or Mobikwik QR codes.
In exchange for accepting mobile wallets or prepaid cards, merchants already pay fees to the PPI provider. The charges are now more uniformly matched at the network level. Each merchant, however, is free to cooperate with their favored acquiring entity.
Prepaid payment instruments (PPIs), such as gift cards, wallets, etc., will incur an interchange fee of up to 1.1% starting on April 1, 2023. The cost is only charged if the transaction exceeds 2,000 rupees.
According to the law, customers are not required to pay fees for PPI purchases made through UPI. However, businesses may decide to pass on the extra costs to customers by raising prices or using another strategy.