The National Payments Corporation of India (NPCI) has released the interchange fee on Unified Payments Interface (UPI) transactions. Wallet providers like GPay, Cred, PhonePe, Paytm and others will have to pay ~1.1% on payments over Rs 2,000 made via UPI. This will come into effect from April 1st and is only applicable for Wallet/PPI where UPI transactions are done by wallets. Credit cards will also have an interchange fee.

From April 1, 2023, UPI transactions above Rs. 2,000 will attract a 1.1% interchange fee, but customers will not have to pay it.

You are not alone; even industry professionals are having trouble understanding the UPI interchange fee. In this article, we will help you understand the UPI interchange fee in the simplest way possible. Until now, everything was free in the UPI process. NCPI issued a not-so-public circular to enhance UPI’s interoperability.

What is the UPI interchange fee?

A 1.1% interchange fee will be applicable on payments over Rs 2,000 made via UPI transactions using PPI. PPI stands for Prepaid Payment Instruments which include wallets like Paytm Wallet, PhonePe Wallet, Amazon Pay, FreeCharge Wallet and others. This also includes gift cards. So if you make a payment over Rs 2,000 via Paytm Wallet to a merchant’s UPI, then users will need to pay a 1.1% interchange fee.

Here is a list of all transactions that will be affected by NPCI’s UPI interchange fee:

Merchant categoryInterchange feeMax. charges
Convenience stores1.1%NA
Statutory payments1.0%₹10
Mutual fund1.0%₹15
Real estate0.7%NA

Please note: Adding money to wallets via UPI is currently free of charge. However, when making a payment of more than Rs 2,000 with a wallet using the app via UPI, an interchange fee will be applied. Issuers such as Paytm and Amazon Pay will pay a fee of 0.15% to the remitter/account holder’s bank. There is no additional charge for the customer as these fees will be compensated by banks or payment providers.

Who will pay Interchange Free?

The interchange fee will be charged by the receiver bank/payment service provider to the merchant, meaning that the user will not pay the fee. For payments below Rs 2,000, there is no fee. For payments above Rs 2,000 made with a wallet, only the merchant will bear the 1.1% fee. However, for payments above Rs 2,000 made via a bank, there is no fee for either merchants or consumers.

UPI Payment for Consumer is Free?

UPI payments for consumers remain free for all peer-to-peer (P2P) and peer-to-merchant (P2PM) transactions. There is no change for consumers; payments made via UPI to a merchant’s bank or any individual will not be affected by this interchange fee. UPI interchange fee is paid by the merchant, but not by the customer, so UPI payment for consumer is still free.