India-based multinational bank ICICI Bank has implemented a new fee structure for payment aggregators (PAs) processing Unified Payments Interface (UPI) transactions on merchant platforms.
Effective as of 1 August 2025, the reform is set to affect platforms such as Google Pay, PhonePe, Mobikwik, and Razorpay.
Why did ICICI Bank implement this change?
Payment aggregators serve as intermediaries between banks and merchants, managing the collection and settlement of payments. ICICI Bank reportedly informed PAs that those maintaining an escrow account with the financial institution will pay two basis points per transaction, capped at less than 10 cents. When it comes to those without an escrow account at the bank, the fee will be four basis points, capped at 11 cents per transaction.
However, no charges will be applied if UPI payments are directly settled into a merchant’s ICICI Bank account, enabling the financial institution to benefit from holding these funds temporarily. According to industry opinions, ICICI Bank’s decision falls in line with recent regulatory discussions on monetising UPI infrastructure. Other private sector organisations, such as Yes Bank and Axis Bank, have already started charging PAs for UPI payments. These three financial institutions together manage a major share of UPI transactions for payers and payees.
Industry experts mention that the accelerated growth of UPI, especially in peer-to-merchant transactions, has scaled infrastructure costs for banks. Also, as UPI transactions do not include a merchant discount rate (MDR), financial institutions earn minimal revenue from providing them. By imposing fees for PAs, banks can offset some operational expenses, thus assisting in the development and optimisation of their operations.
When it comes to merchants, the decision to charge PAs will negatively impact them, as PAs will recover costs through platform fees, convenience fees, and other charges. However, customers will remain exempt from direct UPI charges. Depending on the agreements in place, PAs may put these costs on merchants or bear them themselves.
