Beginning in April, UPI funds over Rs 2,000 made by way of pay as you go devices— reminiscent of wallets or playing cards— will carry an interchange payment of 1.1%.

The payment will likely be relevant on person-to-merchant transactions and never on person-to-person transactions, in keeping with a March 24 round from the Nationwide Funds Corp. of India.

“The interchange expenses launched are solely relevant for the PPI service provider transactions and there’s no cost to prospects,” NPCI mentioned in a press release on Wednesday. There are additionally no expenses for the checking account to checking account primarily based UPI funds, it mentioned.

Interchange payment is usually related to card funds and accounts for the price of accepting, processing and authorising transactions. Within the case of UPI funds made by way of PPIs, the interchange payment will likely be borne by cost system contributors.

“To any extent further, [Paytm Payments Bank] will earn 1.1% interchange income when Paytm Pockets prospects (i.e., the KYC wallets issued by Paytm Funds Financial institution) make cost on retailers acquired by different cost aggregators or banks,” Paytm mentioned in an trade submitting on Monday.

Whereas 1.1% is the blanket interchange launched by the NPCI, some classes of transactions, reminiscent of telecom or agriculture, will appeal to an interchange payment of 0.70%.

The introduction of interchange charges on such funds comes days forward of the March 31 deadline to make Know-Your-Buyer compliant pay as you go wallets totally interoperable on UPI. This is able to permit customers to scan any UPI QR code to pay utilizing pay as you go wallets, as an alternative of being restricted to utilizing a QR code from the identical issuer as their pay as you go instrument.

“This can be a step in the suitable route to make the UPI pricing market-driven and aggressive to incentivise the UPI gamers to get better prices and make extra investments as required,” Mihir Gandhi, companion and chief of cost transformation at PwC India, informed BQ Prime. The interoperability amongst PPIs by way of UPI can even make PPIs extra engaging for different use instances, Gandhi mentioned.

The introduction of interchange payment for such funds can be an incentive supplied to the business to make sure interoperability, the founding father of a fintech startup which works with PPI issuers, informed BQ Prime on the situation of anonymity.

The service provider low cost charge— a payment charged for the processing of debit playing cards and bank cards— varies by issuer, however the Reserve Financial institution of India has capped the MDR charged on debit card transactions within the vary of 0.40% to 0.90% of the transaction worth since January 2018. The interchange payment is a element of the MDR for card funds, which varies in keeping with the cardboard community.

Whereas the blanket interchange payment launched on UPI funds by way of PPI is greater than debit playing cards, there could also be some harmonisation sooner or later, the founder quoted above mentioned.

“The interchange payment is important to create a level-playing area amongst card issuers,” Vivek Iyer, companion and nationwide chief for monetary companies at Grant Thornton Bharat, informed BQ Prime. Making certain interoperability of PPI funds on UPI rails can be among the many apparent goals behind introducing the payment, Iyer mentioned.

The payment is about to return into impact beginning April 1, 2023, in keeping with NPCI’s round. The charges can even be reviewed on or earlier than Sept. 30, 2023, the round mentioned.