ICICI Bank Introduces Charges for UPI Payments Processed by Payment Aggregators Starting August 1
The landscape of digital payments in India is evolving, with major banks like ICICI Bank making significant changes to how transactions are processed and charged. Starting August 1, ICICI Bank will begin levying charges on payment aggregators for UPI (Unified Payments Interface) transactions. This decision follows increasing discussions around the long-term sustainability and costs associated with free UPI payments. Let’s break down what these changes mean for businesses, payment aggregators, and end users.
Understanding the New UPI Charges
UPI has transformed how millions of Indians transfer money and pay for goods and services. While these payments have usually been free for end users, banks have continued to manage costs associated with technology infrastructure and transaction processing.
ICICI Bank’s recent announcement confirms that it will introduce nominal charges on payment aggregators who facilitate UPI payments. Payment aggregators are third-party companies that manage payment processing for merchants and businesses, including popular platforms like Razorpay, PayU, and Cashfree.
Who Will Bear the New Charges?
A point of confusion for many is whether everyday UPI users or merchants will be affected by these new fees. ICICI Bank has clarified that the charges are not directed at individual customers or merchants with standard bank accounts. Instead, the charges will be applied to payment aggregators that use ICICI Bank’s services for digital transactions.
This means that services like Google Pay, PhonePe, or Paytm customers will not see any direct fees as a result of this change. However, payment aggregators who rely on ICICI Bank’s infrastructure may need to reassess their cost structures, especially if they process a large volume of transactions.
How Much Are the New Fees?
The charges introduced by ICICI Bank are structured as follows:
- Aggregators with Escrow Accounts at ICICI Bank:
- These aggregators will be charged at a rate of 2 basis points per transaction. To put it simply, 2 basis points equal 0.02 percent of the transaction’s total value.
- There is a cap in place, meaning that the maximum fee charged per transaction will not exceed ₹6.
- These aggregators will be charged at a rate of 2 basis points per transaction. To put it simply, 2 basis points equal 0.02 percent of the transaction’s total value.
- Aggregators Without ICICI Bank Accounts:
- Those payment aggregators who do not maintain an escrow account with ICICI Bank will face a charge of 4 basis points per transaction, equaling 0.04 percent of the total value.
- This fee is capped at ₹10 per transaction.
- Those payment aggregators who do not maintain an escrow account with ICICI Bank will face a charge of 4 basis points per transaction, equaling 0.04 percent of the total value.
It is important to note that these charges are set up to recover costs that ICICI Bank incurs while paying the National Payments Corporation of India (NPCI), which manages the underlying infrastructure for UPI transactions.
Why Is ICICI Bank Introducing These Charges?
The introduction of these charges is primarily aimed at ensuring financial sustainability for banks providing digital payment services. Until now, banks have shouldered costs associated with routing UPI payments through the NPCI. However, as the volume of digital transactions continues to surge, these costs are becoming substantial.
Recently, top officials, including the RBI Governor, have indicated that the period of completely free digital transactions may soon end in India. The digital payments ecosystem must adapt to support long-term growth, modernization, and security through sustainable financial practices.
Impact on Merchants and Consumers
For merchants with regular accounts at ICICI Bank, there will be no direct impact. They will not be required to pay any extra fees for UPI transactions. Similarly, end consumers using UPI on their preferred apps or through bank accounts will continue to enjoy seamless, free transactions for now.
For payment aggregators, however, this policy may prompt a review of their business models. While the per-transaction fees are relatively small and capped, the sheer volume of transactions could add up to significant yearly costs. This may influence the approach and pricing structures of payment solutions going forward.
