THIS Bank Starts Charging for UPI Transactions on Google Pay, PhonePe – What It Means for You

For years, UPI has been the cornerstone of India’s digital payments, offering seamless and free money transfers for users and merchants alike. However, a silent shift seems to be underway. ICICI Bank has reportedly begun imposing charges on Payment Aggregators (PAs) like Google Pay, PhonePe, and Paytm for processing UPI transactions . While there's no official public statement yet, multiple reports suggest that this could mark the beginning of a significant transformation in the way India transacts digitally.

What’s Changing with ICICI Bank?

According to internal communications accessed by industry sources, ICICI Bank has introduced a transaction fee for payment apps operating through its network. Here’s how the charges stack up:

• For PAs with ICICI escrow accounts:

- 2 basis points (bps) per transaction
- Capped at ₹6 per transaction

• For PAs without ICICI escrow accounts:

- bps per transaction
- Capped at ₹10 per transaction

• No charges apply if the transaction is routed directly through a merchant’s ICICI account.

This move isn't entirely unprecedented - private banks like Axis Bank are already charging between 6 to 9 bps for similar services. But ICICI’s decision is drawing attention because of its potential to reshape the "free" UPI ecosystem.

Why Is ICICI Charging Payment Aggregators?

Despite UPI being free for users, banks have always borne the hidden costs of maintaining the infrastructure that powers these digital transactions. These include:

• Infrastructure maintenance: Running servers, ensuring uptime, and implementing fraud detection systems.
• NPCI switch fee: A standard 0.02% charge per transaction.
• Operational overheads: Backend processing, settlement, and reconciliation of payments.

ICICI’s charges are essentially an effort to recoup these operational costs by passing them on to intermediaries like payment apps.

Who Are Payment Aggregators and Why It Matters

Payment Aggregators act as digital bridges between customers and businesses. Instead of integrating with each bank individually, businesses can accept UPI, card, or net banking payments via these aggregators. As per RBI data (as of July 16, 2025):

• 8 PAs have full authorisation
• 4 are awaiting final approval
• 9 have received in-principle clearance
• 17 are under evaluation

Since these platforms power a large chunk of daily UPI transactions, any cost imposed on them could potentially trickle down to merchants - or eventually, the end user.

RBI and Industry Experts Weigh In

The Reserve Bank of India has hinted before that the free UPI model may not be sustainable forever. At a recent event, Financial Services Secretary Sanjay Malhotra said, “Costs will have to be paid. Someone will have to bear the cost.”

Industry experts echo a cautious optimism. Krishna Kumar, a digital payments analyst, believes banks can still absorb these costs for now, but warns against introducing user-facing charges too soon. “Any sudden change could lead to public backlash or a return to cash transactions,” he cautions.

What Are the Payment Apps Saying?

So far, most major players are keeping their responses muted:

• Cashfree Payments: No comments issued
• RazorPay, PayU, MobiKwik: Acknowledged the development but offered no further clarity
• NTT DATA’s Rahul Jain: Confirmed the communication was directed at PAs using ICICI’s network, noting that similar charges are already in place with some other banks, particularly for high-risk sectors like online gaming.

Could Other Banks Follow Suit?

ICICI might be the first to formalise such charges, but it's unlikely to be the last. Both public and private sector banks are reportedly reviewing similar fee structures as they aim to build more financially sustainable UPI operations. If this trend gains momentum, it could eventually reshape how digital transactions are handled across the board.

The Road Ahead

While this change won’t affect consumers immediately, it could pave the way for a gradual shift in the UPI model. If banks start charging PAs and those costs are eventually passed on, we might see the end of the "free UPI era."

For now, users can continue to enjoy free UPI services - but the writing on the wall suggests this may not last forever.

ICICI Bank’s decision may appear limited in scope today, but it signals a possible turning point in India’s digital payments landscape. As operational costs mount and banks look for sustainable revenue models, the future of free UPI could be at stake. Whether this becomes a widespread trend or remains an isolated move depends on how other banks and regulators respond in the coming months.