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Will you be charged for UPI? Clearing out the confusion

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Created on
April 27, 2023


What’s Inside

UPI, the unified payments interface, has become a significant player in India's financial sector, gaining traction after the 2016 demonetisation and seeing a surge in usage during the pandemic. However, recent news of a 1.1% charge on UPI payments has left many confused and seeking clarification. In this blog post, we will delve deeper into these charges to help you understand how they may affect you.

Who will be charged 1.1% for making payments?

Recently, the NPCI announced that there would be a 1.1% charge on UPI payments, which caused a lot of confusion and concern among users. However, it is important to note that these charges are not levied on users but on merchants who receive payments through UPI. This means that if you are using UPI to make payments, you will not be charged any extra fees. The NPCI has clarified that these charges are only applicable for payments made through pre-paid wallets such as PhonePe or Paytm wallets, and not for bank to bank transfer. The reason for this distinction is that pre-paid wallets charge a fee for adding money to the wallet, and the NPCI believes that these charges will help offset the cost of this fee.

Difference between wallet payments and bank-to-bank transfers

Pre-paid wallets are a popular payment instrument offered by many app-based companies. While they do have some advantages, such as faster UPI payments since there's no authentication required, there are also some drawbacks. One of the main disadvantages is that once you add money to your wallet, it becomes locked in as a wallet balance, meaning you don't have liquid cash for other usage. Additionally, wallets require you to add money from your bank account, which can be inconvenient. On the other hand, bank-to-bank transfers are typically instant and effective, as long as there's good internet coverage. Overall, it's important to weigh the pros and cons of using wallets versus bank transfers to determine which method is best for your needs.


In conclusion, the new charges on UPI payments announced by NPCI should not be a cause for concern for the average UPI user as they are only applicable to merchants who receive payments through pre-paid wallets. While there are some advantages to using wallets, such as faster UPI payments, there are also drawbacks, such as locked-in wallet balances and the inconvenience of having to add money from your bank account. Ultimately, whether to use wallets or bank-to-bank transfers is a personal decision that depends on individual preferences and needs. As UPI continues to evolve and gain popularity, it is important to stay informed and understand the specific terms and charges associated with its usage to make informed decisions about payment methods.

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Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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Will you be charged for UPI? Clearing out the confusion


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