In the digital age, the potential for misinformation is high, especially when it comes to changes in digital transactions’ policy. Recently, a claim has gone viral on social media platforms, stoking fears that users will be subjected to a 1.1% charge for UPI transactions over Rs 2,000, beginning April 1. However, this is a misunderstanding of the actual policy changes, and there is no need for general users to worry about any additional charges.
The confusion originated from an announcement by the Unified Payments Interface (UPI) regarding a change in interchange fees on transactions exceeding Rs 2,000 conducted via Prepaid Payment Instruments (PPIs). Prepaid Payment Instruments come in several forms. Pockets by ICICI Bank, Paytm Wallet, and Amazon Pay are just a few examples of such instruments.
But what is this interchange fee, and how does it affect users?
Interchange fees represent the costs borne by payment service entities, such as banks, when they utilize the facilities provided by other payment mechanisms, like digital wallets. As per the recent National Payments Corporation of India (NPCI) circular, this fee has been revised to range from 0.5% to 1.1%, based on the transaction category and the UPI wallet used.
The Interchange Fee Misunderstanding Explained
For example, if a customer purchases fuel worth Rs 4,000 from a petrol station using a QR code provided by the State Bank of India (SBI) and pays through the Paytm wallet, SBI must pay Paytm an interchange fee of 0.5% of Rs 4,000. However, the important fact to note is that this fee is a matter between the service provider and the bank, and it is not passed on to the consumer.
The confusion arose when a Twitter page of Congress Kerala shared a screenshot of a Business Standard article with a misleading headline. The subsequent spread of this misinformation led to fears among the general public of being charged additional fees for their transactions.
Clarification from NPCI
Further, in a notable development on 29th March 2023, NPCI took to Twitter to clear the air on a matter of public interest. They released a circular specifying clearly that transactions either from one peer to another or from a peer to a merchant, involving bank accounts and PPIs, would not be subjected to any charges. This clarification puts an end to the rumors about consumers having to bear an additional 1.1% charge for UPI transactions above Rs 2,000.
While the interchange fee has indeed been modified, the impact is on the service providers and not on consumers. Users need not worry about any additional charges for UPI transactions exceeding Rs 2,000. Misinformation, like the one debunked in this article, underlines the importance of relying on authentic sources for updates on policy changes, especially those related to financial transactions.
