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A move by the National Payments Corporation of India (NPCI) to charge an interchange fee of up to 1.1% on prepaid payment instruments (PPIs) on UPI from April 1 has elicited mixed reactions from industry experts. Some describe it as a crucial step toward a seamless and inclusive digital payments ecosystem. However, others expressed concerns about the potential impact on consumers.
Reactions from experts:
According to Rajsri Rengan, India’s Head of Development, Banking, and Payments at FIS, the NPCI’s interoperability guidelines are a significant step toward building a more inclusive and seamless digital payments ecosystem.
“It is expected that greater interoperability between payment systems will lead to greater adoption of digital payments, which will lead to greater financial inclusion and economic growth. “Innovation will be encouraged, competition will be enhanced, and the quality of services offered to consumers will improve,” Rengan said.
While Mukund Rao, Co-founder of Muvin said, the new regulation will encourage wallets and PPI issuers to increase UPI adoption among consumers. This will help broaden UPI usage and move India towards a cashless economy.
However, he also noted that consumers will not be impacted by this development, as all peer-to-peer transactions and bank account-to-bank account transactions are excluded from the interchange fee guidelines.
Commenting on the development, Shashank Sharma, Director of ScoreMe Solutions, stated that the decision to levy 1.1% interchange charges in prepaid instruments like prepaid wallets is in line with expectations. This is a step in the right direction.
He also noted that the exemption of small transactions less than INR 2,000 is a desirable feature and will continue to facilitate digitalization.
Akash Sinha, Co-founder & CEO of Cashfree Payment, further believes that the full interoperability of KYC wallets across all UPI merchants is a significant step toward digital payments growth in India. He said that the guidelines would eliminate customers carrying multiple cards.
In addition, it will reduce fraud and theft due to card numbers exposure, and significantly ease collection for merchants. This will increase the payment options available to customers and enhance the customer experience.