New Delhi, June 20 (IANS): Recent inactivity notifications issued by PhonePe have sparked interest among users seeking clarity on how digital wallets function and how they differ from UPI-based payments. A key point highlighted by the company is that a PhonePe account, a UPI-linked bank account and a PhonePe Wallet are separate payment instruments that operate independently. While UPI transactions directly debit funds from a linked bank account, the PhonePe Wallet functions as a prepaid payment instrument (PPI) where money is stored separately. As a result, any inactivity fee applies only to the PhonePe Wallet and not to UPI-linked bank accounts or regular UPI transactions. PhonePe has clarified that if a wallet has a zero balance, no inactivity fee will be recovered from a user’s bank account or through UPI, and wallet balances will not become negative. The company also noted that users who actively make payments through UPI may still receive inactivity notifications if their PhonePe Wallet has remained unused for an extended period, as wallet activity and UPI activity are tracked separately.
According to PhonePe, affected users receive a 15-day advance notification before any inactivity fee is deducted from their wallet balance, giving them an opportunity to activate the wallet, add funds, withdraw eligible balances or decide whether to continue using the service. The company clarified that reactivating a wallet generally requires OTP verification and a wallet transaction, and does not necessarily require upgrading from Minimum KYC to Full KYC status. PhonePe also addressed confusion surrounding cashback rewards, explaining that cashback is usually credited to a separate Gift Card Balance rather than the PhonePe Wallet and therefore is not linked to wallet activity or inactivity charges. Users facing issues while attempting to close their wallets are advised to contact customer support for assistance. The company noted that inactivity charges are common across the prepaid payments ecosystem, as wallet providers incur maintenance, compliance and operational costs even for dormant accounts. The key takeaway for users is that the inactivity fee applies only to the PhonePe Wallet and does not affect UPI transactions, linked bank accounts or result in negative wallet balances.