1. The National Payment Corporation of India (“NPCI”), had issued a circular, dated November 24, 2020, for enhancing complaint handling and resolution process for UPI transactions. Prior to this RBI had already introduced the concept of Online Dispute Resolution (“ODR”) System for digital payments via notification dated August 6, 2020. As per the ODR notification, RBI had advised Payment System Operator (“PSO”), Payment Service Provider (“PSP”) and Third Party App Providers (“TPAP”) to implement ODR process for handling and resolving customer complaints. NPCI has now introduced the Unified Dispute and Issue Resolution (“UIDR”) approach for complaint handling and resolution process. It has been proposed that the ecosystem participants will have to pursue the following for enabling ODR of complaints for transactions under UPI-
- Payer App – enable raising of complaints from UPI app, display the status of transactions and disputes and adhere to the guidelines.
- Payer PSP- enable TPAP with standardized APIs for enabling UDIR and ensure adherence to velocity checks for API usage.
- Remitter/beneficiary bank- Ensure changes are done at the switch for supporting API’s for online status and take appropriate action for pending transactions. Facilitate UDIR process by making necessary changes in reconciliation and complaint handling process.
For accessing the list of API’s to be included and other information for managing UDIR, click here.
2. NPCI had issued a circular, dated November 5, 2020, for guidelines providing 30 percent volume cap for TPAPs in UPI. The circular states that NPCI has issued a cap of 30% of total volume of transactions processed in UPI which shall be applicable on all TPAPs. As per NPCI, this decision has been taken to address the risks and protect UPI ecosystem from frauds as it further scales up. Following are the key highlights-
- The 30% cap to be calculated on the basis of total volume of transactions processed in UPI during preceding three months (on a rolling basis)
- Existing TPAPs which are exceeding the cap will have a period of two years from January 1, 2021 onwards to comply.
- These measures have been taken to balance the consumer experience since UPI has been growing at a steady pace recording 2 billion transactions a month.
The circular can be accessed here.
3. NPCI has been taking a strict approach to limit the volume of transactions by few TPAPs in order to manage the risks associated with concentration of transactions in the hands of few players. Another Circular issued by NPCI, dated November 5, 2020, for giving approval to Whatsapp to go live in a graded manner and starting with a user base of 20 million in UPI is an indicator of the fact as to how NPCI has been taking a proactive stance to address operational risks and is avoiding the risk of concentration of transaction in the hands of few big players.
4. RBI’s notification on Streamlining QR Code infrastructure, dated October 22, 2020, focuses on increasing the interoperability of TPAPs by prohibiting issuance of new QR codes by authorized payment system operators which are non-interoperable. PSOs have been mandated to shift to interoperable QR codes such as UPI QR. The aim of the notification is to reinforce the acceptance infrastructure, provide better user convenience due to interoperability and enhance system efficiency. The Notification can be accessed here.
5. NPCI, via circular dated March 2, 2020, had defined a ‘Large TPAP’ as – “TPAPs processing more than 5% of the total monthly volume/value of the UPI ecosystem”. This was done to mandate large TPAPs to adopt the multi bank model, while providing UPI related service, where they shall associate with a minimum of 3 sponsor banks and maximum of ten banks within 6 months of attainment of threshold of large TPAP. The circular can be accessed here.
6. The above circulars and notifications clearly hint that RBI and NPCI have been trying to address the risks associated with the fast growth of transactions on UPI platform as well as massive percentage of the transactions being done by few large TPAPs. It has to be seen as to how will RBI maintain a balance between dealing with the systemic risk associated with concentration of majority of transactions being done under large TPAPs and at the same time encouraging the adoption of digital payments in the society.