Effective as of August 1, 2025, India-based multinational bank ICICI Bank has introduced a new fee structure for payment aggregators (PAs) handling Unified Payments Interface (UPI) transactions on merchant platforms.

What is the change about?

Payment aggregators act as intermediaries between banks and merchants, overseeing the collection and settlement of payments. According to ICICI Bank, PAs maintaining an escrow account with the bank will pay a fee of two basis points per transaction, capped at less than 10 cents. For those without an escrow account, the fee is set at four basis points, with a cap of 11 cents per transaction.

In cases where UPI payments are directly deposited into the merchant’s ICICI Bank account, no charges will apply, as this allows the bank to benefit from temporarily holding these funds. Experts suggest that ICICI Bank’s decision aligns with ongoing regulatory discussions on monetizing UPI infrastructure. Private banks like Yes Bank and Axis Bank have also started charging PAs for UPI payments.

What are the implications?

This change is expected to affect platforms such as Google Pay, PhonePe, Mobikwik, and Razorpay. For payment aggregators, these fees represent an additional operational cost that could be passed on to merchants through higher platform fees or other charges. Customers will continue to benefit from free UPI transactions.

The accelerated growth of UPI, especially in peer-to-merchant transactions, has increased infrastructure costs for banks. Since UPI transactions do not include a merchant discount rate (MDR), financial institutions earn minimal revenue from facilitating these payments. By imposing fees on PAs, ICICI Bank aims to offset some operational expenses and improve the efficiency of its services.