The wallet interoperability norms of the NPCI have been implemented starting from April 1st. These norms not only enable prepaid payment instruments (PPI) wallets to seamlessly integrate into the UPI ecosystem but also establish an interchange fee of 1.1% for PPI transactions exceeding ₹2,000 through UPI. While this development brings substantial benefits to customers, it is worth noting that the 1.1% charges are comparable to those applied to transactions conducted by UPI merchants via IMPS. NPCI’s guidelines on interoperability enhance the attractiveness of PPI wallets for customers, potentially eliminating the necessity of carrying multiple cards and thereby reducing the risks associated with card number exposure, fraud, and theft.
It should be noted that the 1.1% interchange fee is not applicable to customers but only to UPI merchants.
Explaining further on the amount of charges levied on UPI transactions in regards to merchants due to the 1.1% interchange fee, Mahesh Shukla CEO & Founder of PayMe, an interchange fee of up to 1.1% will be applicable on merchant UPI transactions from 1 April. However, the payments body has clearly stated that no charges will be levied on normal UPI payments of customers, which are mostly bank account-to-bank account transactions.
Shukla further added that the payments body has clearly stated that no charges will be levied on normal UPI payments of customers, which are mostly bank account-to-bank account transactions. The Finance Minister has earlier stated that the UPI is a digital public good, which is convenient for the public and productive gains for the economy; hence, will remain non-chargeable. The move of the NPCI was also in line with the statement of the Finance Minister, and in the case of peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions, the interchange fees will not be applied.
Shukla explained that the NPCI has introduced charges solely for merchant UPI transactions due to the similarity between these transactions and Immediate Payment Service (IMPS) fund transfers. Therefore, it is likely that the charges levied on UPI transactions could be comparable to those applied to IMPS fund transfers.
Furthermore, the robustness of IMPS, which is supported by the NPCI, was highlighted by Shukla. IMPS offers a reliable and real-time interbank electronic fund transfer service, available 24/7 through various channels such as mobile, internet, ATM, and SMS. This efficient service enables instant fund transfers between banks across India, ensuring both safety and cost-effectiveness. Currently, there are 706 live members, including banks and prepaid payment instruments (PPIs), actively using the IMPS platform.