The NPCI has proposed an interchange fee of up to 1.1 per cent and the move is aimed at increasing revenue for banks and payment service providers.
When you transfer money from one bank account to another bank account, it is usually free of charge. This means that you don’t have to pay anything extra to the bank for transferring money between two bank accounts.
On the other hand, when you transfer money from a digital wallet (such as Paytm, PhonePe, etc.) to a bank account, there is usually a transaction fee involved. This fee is typically around 1.1% of the transaction amount, which means that if you transfer Rs. 2,000 from your wallet to your bank account, you may have to pay a fee of Rs. 22.
The reason why there is a fee involved in wallet to bank transactions is that the digital wallet companies have to pay fees to the banks for processing these transactions. The transaction fee helps the wallet companies cover these costs.
So, in simple words, bank to bank transactions are usually free because they happen directly between two bank accounts, while wallet to bank transactions may involve a fee because they involve an extra step of transferring money from a wallet to a bank account.
In Short
- NPCI has recommended interchange fee on UPI for transactions over Rs 2000 made through Prepaid Payment Instruments (PPIs)
- This means some of the digital wallet transaction will incur a fee.
- The NPCI has proposed an interchange fee of up to 1.1 per cent.
The earlier version of the story had a headline that said: “UPI transactions of more than Rs 2,000 to be charged at 1.1 per cent starting April 1, all details”. However, this is not the case. As NPCI clarified, the fee of 1.1 per cent will not be charged on UPI payments but only on payments of Rs 2000 or higher made from digital wallets to UPI IDs.
So, what does this mean in simple words? A few key takeaways:
1- UPI payments made through PPIs — read digital wallets like PayTM wallet — will now attract 1.1 per cent fee if the value of the transaction is Rs 2000 or more.
2- The wallet transactions that are worth less than Rs 2000 will not attract this charge.
3- The fee will be levied on the merchant side. This means merchants may or may not choose to pass on the extra fee to consumers.
WHAT IS PPI ?
PPI stands for Prepaid Payment Instruments, which are essentially digital payment instruments that are preloaded with a certain amount of money. In the context of UPI (Unified Payments Interface), PPIs are virtual wallets that can be used to make transactions on the UPI platform.
PPIs are typically issued by banks or authorized non-bank entities, and can be used to make payments for various goods and services, including online shopping, bill payments, and money transfers. Users can load money into their PPIs using a bank account, credit card, or debit card, and the amount is instantly credited to the wallet.
When it comes to UPI, PPIs can be used to send or receive money, pay bills, and make online purchases. They work in a similar way to bank accounts, but are more flexible and can be opened and closed quickly.
PPIs in UPI are regulated by the Reserve Bank of India (RBI) and are subject to certain rules and regulations, including a limit on the amount that can be stored in the wallet at any given time. Additionally, PPIs may be subject to fees and charges, depending on the specific policies of the issuer.
WHAT ONLINE PAYMENT APP SAY ?
Overall, PPIs in UPI provide a convenient and flexible way to make digital payments, and can be a useful alternative to traditional bank accounts or credit cards.
Please be informed that Paytm UPI is free, fast, secure, and seamless. No customer will pay any charges on making payments from UPI either from bank account or PPI/Paytm Wallet. Please read the
@NPCI_NPCI press release to get more clarity on the issue said by Paytm.
