Which UPI payments will attract interchange fee? Will you have to bear the cost?

FNPCI has advised that UPI transactions made via prepaid instruments, such as wallets and cards will attract an interchange fee of 1.1 per cent for merchant payments from April 1, 2023. Rst

The interchange fee will be levied only on specified merchant transactions of above Rs 2,000.

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As per the circular by NPCI, certain UPI merchant transactions made via prepaid instruments will carry an interchange fee of up to 1.1 per cent of the transaction amount. t

The interchange fee will be applicable on specified categories of merchants such as online merchants, large merchants, and small merchants for transactions of over Rs 2,000 from April 1, 2023.

The interchange fee will not be applicable to peer-to-peer (P2P) transactions or peer-to-peer-merchant (P2PM) transactions between a bank and the prepaid wallet

P2PM is the NPCI classification for small businesses which have a projected monthly inward UPI transaction of less than or equal to Rs 50,000.

So, if you are sending money to friends, family or any other individual or a small business merchant's bank account, it will not attract an interchange fee.

As stated by the NPCI, only certain merchant transactions made by prepaid payment instruments will attract the interchange fee. Wallets, smart cards, vouchers, magnetised chips come under prepaid payment instruments.

Interchange fees are transaction fees that the merchant has to pay whenever a customer processes a transaction. So, if you are making a prepaid payment through UPI at a store using a PhonePe QR code, the merchant has to pay the interchange fee to the payment service provider, which is PhonePe here.

the interchange fee is similar to the merchant discount rate applicable to credit cards. Users do not have to pay any interchange fee.

The interchange fee will vary in the range of 0.5 per cent to 1.1 per cent, based on the merchant category codes, said NPCI. An interchange fee of 0.5 per cent will be levied for categories such as fuel, education, agriculture, and utility payments. Categories such as convenience stores, and specialty retail outlets will have an interchange fee of 1.1 per cent.