India to introduce a 0.4% merchant fee for large payments via UPI
Starting October 15, India will introduce a 0.4% fee for merchants on certain payments through the Unified Payments Interface (UPI) system exceeding 2,000 rupees. The service will remain free for users, and merchants will be prohibited from passing the new charge on to buyers, TechCrunch reports.
Terms of the new fee
The fee for transactions via UPI will not exceed 300 rupees for payments starting from 75,000 rupees. Payments of 2,000 rupees or less will not be subject to a merchant fee. Small businesses receiving up to 100,000 rupees per month through UPI will also be exempt.
According to the National Payments Corporation of India (NPCI), more than 95% of UPI merchant transactions by number involve payments of up to 2,000 rupees. The corporation said that the 0.4% rate is low enough for businesses to cover it without changing the prices of goods or services for consumers.
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Funding payment infrastructure
UPI has been free for merchants since 2020, when India abolished fees to encourage the adoption of digital payments. Since then, the government has subsidized banks and payment companies for processing some of these transactions. In August, the country's authorities amended payment legislation, allowing fees to be charged to merchants for certain UPI transactions.
According to industry estimates cited by NPCI, the annual cost of operating the network, including server capacity, fraud prevention and technical support, amounts to approximately 200 billion rupees. NPCI plans to distribute revenue from the new fees among UPI ecosystem participants and direct it toward infrastructure, cybersecurity, fraud prevention and customer service.
In August, UPI processed 24.51 billion transactions worth 29.9 trillion rupees. NPCI also intends to use part of the fee revenue for a fund to develop digital payment infrastructure and attract merchants in small towns and rural areas. The corporation plans to work out the fund's details with India's central bank over the next three months.
