Here’s how UPI merchants will benefit from PPI wallets interoperability, set to go live from April 1

NCPI has permitted prepaid payment instruments (PPI) wallets to be part of an interoperable UPI ecosystem. Further, it fixed an interchange fee of 1.1% for using PPIs for transactions above ₹2,000 using UPI. These new guidelines are set to become effective from April 1st. The new interoperability of KYC wallets is not just a good news for fintech companies, but is also a significant development for UPI merchants.

Akash Sinha, Co-founder & CEO, of Cashfree Payments, said, the NPCI circular announcing the full interoperability of KYC wallets across all UPI merchants is a significant step towards the growth of digital payments in India. The guidelines make wallets more appealing to customers by opening up newer use cases of payments. It will eliminate the need for customers to carry multiple cards, thereby reducing fraud and theft due to the exposure of card numbers.

The Cashfree Payments CEO explained that many merchants use wallets for accepting customer payments, for instance, at PoS.

He said, "interoperability will significantly ease collection for them since it will allow merchants to accept wallet payments regardless of the wallet being used by the customer. Further, it will eliminate the need for specific integrations with a particular wallet to accept payments on a website since customers can also pay via UPI or card infrastructure. This will increase the payment alternatives for customers."

Further, he said, "the interoperability of wallets with UPI will catalyse the progress of digital payments, enhancing the customer experience. We look forward to the announcement of similar such initiatives and measures while ensuring an effective regulatory environment, to assist the sustainable growth of digital payments."

Also, Sanjeev Kumar, Co-Founder, Executive Director & CEO at Spice Money said, "We view this development as a highly promising opportunity, as we recognize the significant potential of wallets as a potent tool for onboarding rural Indian consumers onto digital platforms. The interoperability of PPI (Prepaid Payment Instruments) greatly strengthens its usefulness as an instrument. This development represents a positive progression for the ecosystem, as it will expand the reach of digital payments to a greater number of users and merchants."

In regards to the interchange fee of 1.1% for merchant transactions initiated using PPI on the UPI network, Ramesh Narasimhan, CEO, of Worldline India said, "the interchange fee has been introduced by NPCI for P2M transactions only (for greater than 2K value) that will happen on the wallet in the UPI framework. Currently, these wallets are serviced independently by the respective PPI issuers and interchange was also managed by each of them independently. This interoperable program shall now rationalise the interchange for P2M transaction and bring it under NPCI governance."

Narasimhan also added that the interchange circular will not have any impact on the UPI transactions in any manner. He said, "it is only rationalising the interchange on wallets and bringing it under the scope of NPCI. The other advantage is that going forward all wallets will be available from all banks who support UPI acquiring as it will be part of the stack (UPI, RuPay Credit Card, and PPI Wallets).”

Recently, RBI governor Shaktikanta Das said, Unified Payments Interface (UPI) which was launched in 2016, has revolutionised the payments ecosystem with about 803 crore transactions worth ₹13 lakh crore processed in January 2023 alone.

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