The era of completely free UPI transactions is shifting! ICICI Bank has announced it will start charging payment aggregators up to ₹10 per UPI transaction from August 1, 2025. This groundbreaking change affects how businesses process payments through popular apps like Google Pay, PhonePe, and Paytm.
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What’s ICICI Bank Changing from August 1, 2025?
ICICI Bank has outlined a new fee structure for its UPI merchant acquiring services, with charges of 0.04% or 0.25 paise (whichever is higher), subject to a maximum of ₹10 per transaction. This move follows similar steps by Axis Bank and Yes Bank, signaling a industry-wide shift.
New UPI Fee Structure
| Transaction Type | Charge Rate | Maximum Fee | Billing Method |
|---|---|---|---|
| UPI P2M Transactions | 0.04% or 0.25 paise | ₹10 per transaction | Monthly billing |
| Direct ICICI Account | No charges | Free | N/A |
| P2P Transactions | No charges | Free | Unaffected |
Who’s Really Affected?
Good news for consumers: ICICI Bank will be charging payment aggregators and not the end customers. This means individual users won’t see immediate changes in their Google Pay or PhonePe experience.
Impact on businesses: The charges will apply to merchants such as shopkeepers, restaurants, and other business entities using the bank’s services for UPI transactions.
Companies Directly Impacted
- Payment Aggregators: RazorPay, PayU, Cashfree
- UPI Apps: Google Pay, PhonePe, Paytm (for merchant transactions)
- Merchants: Small businesses, restaurants, retail stores
Why This Change Now?
This revision has been carefully considered in light of the increasing costs related to technology, transaction processing and other operational factors driven by evaluating economic dynamics.
The move reflects the banking industry’s need to monetize UPI services that have been offered free for years while bearing infrastructure costs.
Strategic Considerations
Banks are following RBI Governor’s recent statements about the sustainability of free UPI services. With transaction volumes skyrocketing, maintaining infrastructure without revenue streams has become challenging.
Will Other Banks Follow?
ICICI Bank joins Axis Bank and Yes Bank in implementing UPI charges. Given the industry trend, other major banks including HDFC Bank and SBI may introduce similar fee structures soon.
Current Bank Status
- ICICI Bank: Charges from August 1, 2025
- Axis Bank: Already charging
- Yes Bank: Already charging
- HDFC Bank & SBI: No charges announced yet
Exception: Direct Account Settlements
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.
This creates an incentive for merchants to maintain ICICI Bank accounts for their business transactions.
Impact on Digital Payment Ecosystem
For Consumers
- Immediate impact: None – personal UPI transactions remain free
- Potential future impact: Payment aggregators may pass costs to merchants, potentially affecting pricing
For Businesses
- Increased operational costs for payment processing
- Need to evaluate payment aggregator options
- Possible switch to direct bank account settlements
For Payment Apps
- Revenue pressure as processing costs increase
- Business model evaluation required
- Potential service restructuring to maintain profitability
What Should You Do?
For Individual Users
Continue using UPI as normal – no immediate changes to your Google Pay, PhonePe, or Paytm experience.
For Business Owners
- Review current payment processing costs
- Consider opening ICICI Bank business accounts for direct settlements
- Monitor announcements from your payment aggregator
- Evaluate alternative payment solutions
The Bigger Picture
This move represents a maturation of India’s digital payments ecosystem. As UPI transactions cross billions monthly, the infrastructure supporting these services needs sustainable revenue models.
This change affects fintech operations and sparks industry debate over the sustainability of free digital payments, potentially reshaping how digital payments work in India.
Stay updated with the latest fintech news and digital banking updates on TechnoSports.
Official Sources:
Frequently Asked Questions
Q: Will I have to pay extra charges when using Google Pay or PhonePe for personal transactions?
A: No, individual users won’t face any additional charges. The fees apply only to payment aggregators handling merchant transactions. Your personal UPI transfers, bill payments, and peer-to-peer transactions remain completely free.
Q: How will these charges affect small businesses that accept UPI payments?
A: Small businesses may see increased costs if their payment aggregators pass on these charges. However, businesses can avoid fees by settling UPI transactions directly into ICICI Bank accounts. The impact will vary depending on how payment service providers adjust their pricing models.
