UPI Transaction Charges: What is PPI and how will it impact people using GPay, Paytm and PhonePe

UPI Transaction Charges: The National Payments Corporation of India (NPCI) said that it has now permitted the Prepaid Payment Instruments (PPI wallets) to be part of the interoperable UPI ecosystem and there is no charge for customers. There will be no charges for the bank account to bank account-based UPI payments (normal UPI payments). "The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, the NPCI said in a statement.

What is PPI?

With the use of Prepaid Payment Instruments, one can send and receive money without any physical exchange of cash or card. Prepaid payment instruments examples include smart cards, online accounts, online wallets, stripe cards, paper vouchers, etc. The primary objective of these instruments is to get access to the amount already prepaid 

According to recent regulatory guidelines, the PPI wallets have been permitted to be part of the interoperable UPI ecosystem, according to the NPCI. 

Ameet Venkeshwar, Business Head, LoanTap said that customers will not be impacted by the latest development as the extra charge will be borne at the merchant’s end. 

“Any transaction above Rs 2000 and done through UPI using PPI mode only that is using any digital wallets like Paytm, PhonePe, etc will be charged at 1.1 per cent. This will also be applicable while loading the digital wallets using the UPI mode. All bank-to-bank transactions will still remain free of any charges. This only applies to UPI transactions made to a merchant. The extra charge will be borne at the merchant’s end," Venkeshwar said.

Many have a common question that will it impact people using payment options like GPay, Paytm and PhonePe? Ameet Venkeshwar further said, “it will not impact customers. All peer-to-peer transactions using GPay, Paytm and PhonePe shall remain unaffected. It is also not likely to affect small merchants as most of the normal day-to-day transactions are below Rs 2000. Only the UPI transactions that are above Rs 2000 made to a merchant through PPI wallets while shopping, dining, etc will have an extra charge at the merchant’s end.”

How PPI is different from UPI payments?

UPI transactions are real-time transactions between two bank accounts, whereas PPI transactions involve prepaid payment instruments like mobile wallets, gift cards, and other virtual payment modes. UPI is primarily used for Peer to peer transfers and merchant payments, while PPIs are often used for bill payments, online shopping, and other transactions. UPI also has a high payment limit as compared to PPI.