NPCI's Initiative on Unified Payments Interface (UPI) Interchange Fees

The National Payments Corporation of India (NPCI) is exploring a lower, uniform interchange fee aimed at encouraging mobile wallet companies to expand their involvement in the Unified Payments Interface (UPI) business.

Current Fee Structure

• Currently, an interchange fee of 1.1% is applied on wallet-based transactions via UPI for amounts of ₹2,000 and above.
• Transactions below ₹2,000 do not incur any fee.

Proposed Changes

• A uniform interchange fee of 0.6% to 0.7% is being considered for all transactions.
• This change aims to encourage prepaid payment instruments (PPIs) or mobile wallets like MobiKwik, Amazon Pay, Slice, and Omnicard to promote interoperable QR code-based UPI payments among customers.

Benefits of the Proposed Fee Structure

• Increases revenue-generating opportunities for wallet companies, prompting them to push UPI payments via wallets instead of direct bank account transactions.
• Helps reduce the burden on the banking system by diverting small-value transactions to mobile wallets.
• Enhances security by reducing the exposure of bank accounts to multiple transactions.

Market Dynamics and Statistics

• The average ticket size of a UPI transaction is approximately ₹1,300.
• There is an existing interchange of 1-1.5% on Rupay credit card payments made via UPI.
• In December 2024, NPCI processed 10.3 billion merchant-facing UPI payments totaling ₹6.3 lakh crore.
• Mobile wallets settled ₹9,239 crore in 444 million merchant-focused transactions within the same period.

Conclusion

The initiative aims to unlock new payment use cases for mobile wallets and further integrate them into the UPI ecosystem, benefiting both consumers and financial technology services.