INTERCHANGE FEE BY NPCI (2023-MARCH) Flashcards
What is an interchange fee in general?
An interchange fee is a small fee the merchant’s bank pays to the customer’s bank when a card or digital payment is processed. It helps cover transaction processing costs.
What is UPI, and why is it significant?
UPI (Unified Payments Interface) is an Indian real-time payment system by NPCI. It revolutionized digital payments in India with its simplicity and low costs.
Describe the recent change NPCI made regarding UPI fees.
In March 2023, NPCI instituted a limited interchange fee on UPI merchant transactions using Prepaid Payment Instruments (PPIs) exceeding ₹2000. This aims to recoup infrastructure costs and promote UPI usage.
Are all UPI transactions subject to the interchange fee?
No. Only UPI merchant transactions via PPIs (wallets, gift cards, etc.) above ₹2000 are affected. P2P (person-to-person) transfers or bank-to-wallet transfers don’t have this fee.
What’s the maximum interchange fee on UPI transactions?
The maximum fee is capped at 1.1% of the transaction amount. Merchant categories might have slightly varying rates within that range.
What are the primary goals of introducing the UPI interchange fee?
Offsets Costs: Helps cover UPI infrastructure maintenance costs.
Promotes Adoption: Provides PPIs a revenue source, encouraging them to push UPI usage further.
Will most users be substantially impacted by the UPI interchange fee?
Likely not. The fee only applies to larger merchant transactions via PPIs. The aim is to balance cost recovery with ongoing affordability of UPI.
What is an ATM?
An ATM (Automated Teller Machine) is an electronic banking outlet that allows customers to perform basic transactions without needing to visit a bank branch.
What are the four main types of ATMs?
Bank Label ATMs: Owned and operated directly by a bank.
Brown Label ATMs: Owned by a bank, but operations (cash management, security) are outsourced.
White Label ATMs: Run by non-bank companies.
Micro ATMs: Handheld devices used for basic banking in remote locations.
Describe the primary functions of a typical ATM.
Cash withdrawals
Balance inquiries
Deposits (at some machines)
Bill payments
Fund transfers between accounts
What is the difference between a white label ATM and a bank label ATM?
Bank label ATMs are owned and operated by a specific bank, while white label ATMs are owned and operated by independent, non-bank companies.
