Starting August 1, private sector lender ICICI Bank will start charging payment aggregators (PAs) a fee for handling Unified Payments Interface (UPI) transactions that these PAs facilitate on merchant platforms, reported Business Standard. For the unversed, PAs act as intermediaries between banks and merchants as they simplify the payment process by pooling funds and settling them with the merchant. These include Google Pay, PhonePe, Mobikwik and Razorpay, among others. The bank has reportedly sent letters to payment aggregators intimating them of this decision. Quoting a source familiar with the development, BS reported that the bank will charge PAs that maintain an escrow account with the bank 2 basis points (bps) per transaction, capped at ₹6. For PAs that do not have an escrow account with the bank, the charge will be 4 bps, capped at ₹10 per transaction. However, the bank will not levy any charges on PAs if the UPI transactions are settled directly into an ICICI Bank account held by the merchant, as the bank will have the opportunity to earn a float on these funds. “If you look at the RBI governor’s recent statement on charging for UPI, banks may have taken a hint from that statement while rolling out pricing for PAs. From a bank’s perspective, they have invested in the technology, costs surrounding the UPI switch, issuing and acquiring side,” an executive at a payments company said. These banks charge PAs Yes Bank and Axis Bank are among other private sector banks that charge PAs for UPI payments, the executive added. The top three players in the UPI set up are Yes Bank, Axis Bank, and ICICI Bank, from the payer as well as the payee side. According to experts, with the volume of UPI transactions rising significantly, especially in the peer-to-merchant (P2M) segment, banks are compelled to invest considerably in infrastructure to support the spike. But since there is no merchant discount rate (MDR) levied on UPI transactions, the ecosystem brings almost no revenue for handling and processing these transactions. Who eventually pays? In addition, banks pay a fee for using the UPI switch. Payment aggregators charge merchants a platform fee, a convenience fee, and other charges for handling their payments. As end customers are not charged for UPI transactions, sources said banks are now considering tapping into this revenue stream by levying charges on PAs. “PAs will either pass on the costs to their merchants to maintain margins or absorb them based on the kind of arrangement they have with merchants. Credit card transactions (on UPI) have also grown, so there is a form factor for monetisation already in some places,” an executive at another payments firm said. Escrow account with aggregators When a customer makes a UPI payment on a merchant’s platform, the PA acts as a facilitator between the customer’s bank, where the money is debited and the merchant’s bank, where the money is eventually credited. PAs usually keep an escrow account with a bank of their choice. The funds are initially settled into this escrow account before being transferred to the merchant’s account. Once the funds are received in the escrow account, the PA settles the amount with the merchant’s bank account.

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