UPI Growth:

Total UPI transactions climbed by 91% in 2022 to more than 74.05 billion from 2021, while value UPI transactions increased by 76% in 2022 to Rs 126 trillion (Rs 126 lakh crore) from 2021.

Overall, among 87.92 billion transactions totaling Rs 149.5 trillion in 2022 from cashless modes including UPI, cards, and prepaid payment instruments (PPIs or Digital Wallets), UPI P2M (Peer to Merchant) transactions accounted for 40%, compared to 44% for UPI P2P (Peer to Peer) transactions, which were not necessarily payments but potentially money transfers among people.

Transaction Types in UPI

Before we dive into the new UPI transaction regulations, let’s define the different sorts of transactions. There are three kinds of transactions.

1. P2P
2. P2PM
3. P2M

What is peer-to-peer (P2P)?

Peer to Peer (P2P) payments are a technique that allows the user to transfer money from his bank account to the account of another individual using the UPI. The following are some p2P examples:

Transferring funds from personal banks to Self

Transfering funds to friends, family, and Contacts

What exactly is P2PM?

The NPCI classification for small enterprises with a predicted monthly inward UPI transaction of less than or equal to Rs 50,000 is P2PM (peer-to-peer-merchant).

What exactly is P2M?

P2M stands for peer to merchant, and in this situation, the merchant would have obtained a business UPI from one of the NPCI-registered suppliers. link to learn more about vendors

New Guidelines

According to the NPCI circular, certain UPI merchant transactions done using prepaid instruments would incur an interchange fee of up to 1.1% of the transaction amount. From April 1, 2023, the interchange charge will be levied on specific merchant categories such as online merchants, major merchants, and small merchants for transactions over Rs 2,000.

Who will not be charged

1. Customers
2. Merchants under P2PM?

Which UPI transactions will incur an interchange fee?

According to the NPCI, only specific merchant transactions involving prepaid payment instruments will be subject to the interchange fee. Prepaid payment tools include wallets, smart cards, vouchers, and magnetised chips. Paytm wallet, PhonePe wallet, Amazon Pay are a few examples of wallets.

Assume a consumer has money in your Paytm or PhonePe wallet and scans the QR code to pay with it. If the transaction amount exceeds Rs 2,000, the merchant will be charged an interchange fee of up to 1.1%.

What are the interchange costs for UPI merchant transactions made through PPI?

According to NPCI, the interchange fee will range from 0.5% to 1.1% depending on the merchant category codes. Fuel, education, agriculture, and utility payments will be subject to a 0.5 percent interchange fee. convenience retailers and speciality retail establishments will be charged an interchange fee of 1.1%.

What is it for Social Sellers ?

As a social seller , if you had not availed Business UPI. You will still not be charged of any amount but incase you have availed a Business UPI It should be at least 1.1% if the customer uses money from the wallet or the transaction value is more than Rs. 2ooo

Please keep in mind that smaller retailers will be unaffected because the interchange fee does not apply to them. This cost will be borne by medium-sized shops solely on transactions above Rs 2,000. This change, however, will have an impact on high-value transactions.

Conclusion

UPI technology has transformed the way transactions are carried out in India. The increased popularity and expansion of UPI transactions attest to its simplicity and convenience. However, with the implementation of new rules, certain UPI merchant transactions done using prepaid instruments will be subject to an interchange fee of up to 1.1% of the transaction value beginning April 1, 2023. Despite this, UPI is a popular means of payment for many organisations and consumers, and its future appears bright.