Introduced charges for UPI payments done through Payment Aggregators (PAs) like Razorpay, PayU, Pine Labs, etc. that help merchants accept digital payments. These charges are not for regular users or small merchants directly, they apply to business-to-business (B2B) transactions.
Under the new policy, if a Payment Aggregators (PA) has an escrow account with ICICI Bank, 2 paise per ₹100 (maximum ₹6 per transaction) will be charged. If a PA doesn’t have an escrow account with ICICI Bank ₹10 per transaction will be charged and if the payment is settled directly into a merchant’s ICICI Bank account then there will be no charges.
Why ICICI Bank Introduced the UPI Charges?
UPI is India’s most used digital payments system, handling over 1,900 crore transactions per month. UPI is free for consumers and small merchants because of government policy. But the actual costs of running it have been borne by banks and tech providers.. Banks like ICICI spend money to maintain infrastructure, process transactions, pay switching fees (routing UPI traffic through NPCI).So far, they’ve been absorbing the cost without charging customers. Now, ICICI (and some other banks like Axis and Yes Bank) are trying to recover some of those costs, especially from enterprise-level players, not individuals.
Impact on Payment Aggregators (PAs)
Payment aggregators (PAs) are in a difficult position right now. Until now, many of them have been paying for the cost of UPI transactions themselves, without charging merchants or customers. They managed to do this by using money earned from other services they offer—like credit, loans, or special premium features. They’ve been covering UPI costs to keep things free for merchants.
But with banks like ICICI now charging fees for handling UPI payments, these companies may no longer be able to cover the costs on their own. This means they might have to either raise prices, charge merchants, or find new ways to manage the extra expenses. Now, with ICICI and other banks starting to charge, PAs may, increase their fees for merchants, rework their pricing models or will look for cheaper banks or optimize settlement routes.
Fintech firms have to adjust their business plans so they can still make money and keep offering smooth payment services despite the new fees. They need to find ways to deal with this either by adjusting their pricing, finding cheaper partners, or changing how they handle transactions. They need to act quickly and smartly to stay competitive.