ICICI Bank, one of India’s top private banks, is bringing changes to how it charges for UPI transactions made on popular payment platforms like Google Pay, PhonePe, Mobikwik, and Razorpay. Starting August 1, 2025, a new fee structure will come into effect for these payment aggregators. This article breaks down what is changing, why it’s happening, and how it may affect both businesses and customers.
What Are Payment Aggregators and UPI Payments?
Payment aggregators, also known as PAs, are companies that help merchants accept online payments from customers. Instead of working directly with a bank, merchants can use these platforms to handle collections, settlements, and security of digital payments. UPI, or Unified Payments Interface, is a fast and easy way for people to pay businesses using their phones.
ICICI Bank’s New Fee Structure Explained
ICICI Bank’s new rule introduces two types of charges for payment aggregators handling UPI transactions:
- Aggregators with an ICICI Bank Escrow Account:
If a payment aggregator chooses to keep its escrow account (where customer payments are held before giving them to the merchant) with ICICI Bank, it will be charged 2 basis points per transaction. This means for every ₹10,000 paid, a fee of ₹2 will be charged, with the charge capped at a maximum of ₹6 per transaction. - Aggregators Without an ICICI Bank Escrow Account:
For those payment aggregators using escrow accounts at other banks, the fee doubles to 4 basis points per transaction, which means ₹4 per ₹10,000, with the charge capped at ₹10 per transaction. - No Charges for Direct Merchant Settlements:
If a payment made through UPI is deposited straight into the merchant’s ICICI Bank account, no new fee is charged. This encourages merchants to bank directly with ICICI.
Why Is ICICI Bank Introducing These Charges?
The number of UPI transactions in India has exploded, putting a strain on banking systems and increasing costs. Unlike credit and debit card payments, banks don’t earn much from UPI because there are no charges for merchants or customers in most cases. To cover rising expenses for safety, technology, and processing, banks are now looking to recover some costs from payment aggregators.
How Does This Affect Merchants and Customers?
- For Merchants:
Merchants might see new or higher fees from their payment aggregator platforms, depending on how these businesses choose to handle the additional costs from ICICI Bank. Some platforms might pass the cost to merchants; others might absorb it themselves. - For Customers:
Customers paying through UPI will not pay any new or extra charges. UPI remains free for buyers.
Why Merchants Might Choose ICICI Bank
By depositing payments directly into an ICICI Bank account, merchants can avoid these new charges from payment aggregators. This could make ICICI more attractive to businesses who want to keep costs low. At the same time, the bank benefits by holding these funds, even temporarily.
What About Other Banks?
ICICI is not alone in making these changes. Other private banks like Yes Bank and Axis Bank already have similar fee structures for UPI transactions handled by payment aggregator platforms. Together, these banks process a large share of India’s digital payments.
What Should Merchants and Platforms Do Now?
Payment platforms may now adjust their own fee structure for merchants or renegotiate deals with banks. Merchants should review how payments are routed and decide if moving their main account to ICICI Bank might save them money. It’s a good time to compare costs across banks and platforms.
ICICI Bank’s new fee structure for UPI payment aggregators is changing the way digital payments are handled behind the scenes. While customers will not notice any difference, merchants and payment platforms must plan for a possible increase in costs and consider new settlement options. This change signals that digital payments in India are growing up, and companies must adapt to a more sustainable model for everyone involved.
