UPI PAYMENTS - ECONOMY
News: UPI
merchant transactions of over ₹2,000 to attract 1.1% charge from April 1
What's in the news?
● Starting
April 1, merchant transactions exceeding
₹2,000 in value done using Prepaid Payment Instruments (PPI Wallets) on UPI
will attract an interchange charge of 1.1%.
● However,
“the new interchange charges are only applicable for the PPI merchant
transactions and there is no charge to customers,” the National Payments
Corporation of India (NPCI), which governs UPI, said in a statement.
Key takeaways:
● It
is further clarified that there are no charges for the bank account to bank
account based UPI payments (i.e. normal UPI payments).
Interchange fee:
● The
Interchange fee is generally associated
with card payments to cover transaction costs.
PPI instruments and UPI:
● As
per recent regulatory guidelines, the PPI Wallets had been permitted to be part
of the interoperable UPI ecosystem.
● The
new interoperability guidelines for prepaid payment instruments announced by
the NPCI is a significant step towards building a more inclusive and seamless
digital payments ecosystem in India.
Unified Payment Interface (UPI):
● It
is a common platform through which a
person can transfer money from his bank account to any other bank account in
the country instantly using nothing but his/her UPI ID.
● It
is developed by the National Payments
Corporation of India (NPCI) under the guidelines of the RBI.
● The
interface is based on the Immediate
Payment Service (IMPS) platform.
● UPI
is a payment system that allows money transfer between any two bank accounts by
using a smartphone.
● UPI
allows a customer to pay directly from a bank account to different merchants, both online and offline, without the
hassle of typing credit card details, IFSC code, or net banking/wallet
passwords.
● The
UPI app merges a number of banking features, facilitating seamless and secure
fund transfer and merchant payments at a single platform.
● It
also allows Peer to Peer collection
requests.
● Launched
in 2016.
How will it work?
● A
customer can transfer money to another person through a unique virtual address,
or mobile number, or Aadhaar. Therefore, customers do not need to know the
payee’s IFSC code, bank account details, etc. and this will make the process
simpler.
● A
customer can have multiple virtual
addresses for multiple accounts in various banks. There is no account
number mapper anywhere other than the customer’s own bank. This allows the
customer to freely share the financial address with others.
Go back to basics:
National Payments Corporation of India (NPCI):
● NPCI
is an umbrella organization for operating retail payments and settlement
systems in India.
● It
is an initiative of the Reserve Bank of
India (RBI) and Indian Banks Association (IBA) under the provisions of the
Payment and Settlement Systems Act, 2007 for creating a robust Payment and
Settlement Infrastructure in India.