I'm sorry!

This isn't how it was supposed to be!

Apr 02, 2023

Hello people!

I’m writing to you after weeks now! And this isn’t how it was intended to be. So first of all, I’m sorry!

I’ve just been swamped with work, and haven’t been able to get time to write. But I promise I’m going to do better!

Anyway, today’s newsletter is going to be super-short, where I’m going to talk about UPI - whether it’s free, who bears the charges and more importantly, will we ever have to pay for UPI in future

Let’s begin!

First, what’s the deal with charges on UPI?

So last week, NPCI issued a notification saying there will be some charges on UPI.

But you don’t need to worry. Here’s why:

There are no charges for bank-to-bank UPI transactions. It’s still free!
The charges are levied on transactions where you pay using UPI via a Prepaid Payment Instrument (PPI) to a merchant (we’ll use the words “PPI” and “wallet” interchangeably for easier understanding). So for example, if you scan a UPI QR code at a kirana store and pay using your Paytm wallet (not your bank account), THEN there will be charges.

Wait, UPI using wallet? What sorcery is this?

Lol, if you’re confused, don’t be! Take a deep breath, and let’s do this.

So, UPI is just a mode of payment. When you pay using UPI, at the backend, there can be a bank account, a PPI or a even a credit card that gets debited.

Yes, we mainly use only bank account-based UPI, but these other modes are possible too! Note the transaction flow when you make a UPI payment via Paytm next time. The app will ask you whether you want to debit your wallet or your linked bank account. Here’s what it looks like:

As you can see in the above image, it’s a UPI transaction, but there’s an option to pay via bank account or via “paytm wallet”. So you’re essentially making a UPI payment only, to a UPI ID. But your money can be debited either from your linked bank account or your linked wallet.

So, NPCI has started charging for transactions which have a PPI (wallet) in the backend. For bank-to-bank transactions, it’s still free.

But that’s not the end of the story. You still don’t have to pay any extra charges even if you’re paying with UPI linked to your prepaid wallet.

So who pays the charges?

It’s either the merchant or the acquirer. The merchant here is the kirana store you are paying to, and the acquirer is the app you’re using to pay (for eg: Paytm)

So while it’s still not clear who of these two will pay the charges, it definitely won’t be you, the consumer 😁

There are also some charges to load your wallet via UPI. But that too, won’t be borne by you. So it’s chill 😎

That’s all good. But will you ever need to pay for UPI in future?

I highly doubt it.

You see, the government wants to encourage digital payments, and it has been very vocal about it.

And UPI has picked up like crazy. We’re seeing 36 crore UPI transactions every single day. That’s quite a feat! And if I were the government or RBI or even NPCI, I wouldn’t want to disrupt this by charging consumers.

If they ever charge bank-to-bank transactions, they’ll probably put the charge on merchants or acquirers, similar to what happens with credit card transactions (if you want to read how credit card transactions work, you can check out my earlier post here)

But hey, that’s a personal opinion! Don’t shoot me if they start charging you for UPI in future! 😛

Well, that’s about it for today. Like I said, I’ll definitely be more regular in my newsletters going forward; apologies again for the long break!

Also, people, we’re at 9,225 subscribers as of today. So why don’t you share this with friends and help us reach 10K? Your friends will learn something new, and I’ll be grateful to you!

Feel free to shoot any questions that you may have by replying to this email. More than happy to answer!

Have a great Sunday!