Online Dispute Resolution (ODR)-101
The Online Dispute Resolution (ODR) guidelines are now live for digital payments. ODR uses a branch of technology to facilitate the resolution of disputes occurring between two parties. In this case, ODR is set to play an important part in the ecosystem of online payment disputes.
Before we understand what ODR implementation is, let’s know a bit more about the circumstances that led to this event.
Since the rise of UPI and online payment apps, we no longer rummage for our wallets. Be it paying the local vegetable vendor or utility bills, all you need is a smartphone and the UPI app.
The pandemic spearheaded the revolution of digital payments due to social distancing, traveling restrictions, and so on. Even though UPI’s origins can be traced back to 2016, it has witnessed massive growth in the past two years. In fact, in 2022 UPI touched a whopping figure of 74 billion transactions worth about 125.94 trillion.
But, like a coin having two sides, digital payments have their own load of troubles. Disputes and frustrations surrounding those disputes are on a steady rise. There is a lack of clear direction in tracing the transaction route and the funds involved. The user was on a circle of bank, biller, and payment apps, and every dispute takes weeks to solve.
To combat the same and reduce the turnaround time for disputes, the Reserve Bank of India (RBI) issued a directive on August 6th, 2020, to implement an Online Dispute Resolution (ODR) system for all digital payments. This system must be implemented by payment service operators and the ecosystem participants.
Even though RBI issued this notification 2 years back, it had fewer takers, and there was little effort put into bringing forth the solution. Soon, the National Payments Corporation of India (NPCI) followed suit and issued a circular on implementing an ODR solution by September 2022, failing which payment apps cannot onboard new users.
Now that we have established the timeline, let’s understand the concept of ODR and its implications.
According to the RBI, ODR is a system for resolving customer disputes and grievances pertaining to digital payments using a system-driven and rule-based mechanism with zero or minimal manual intervention.
In simple terms, RBI wants a system that is completely unbiased and transparent when it comes to resolving payment disputes. It also stresses the fact that ODR should have an automated process with zero to minimal manual intervention.
The structure of the Online Dispute Resolution system:
- RBI has mandated that every Payment Service Operator (PSO) must implement an ODR system to resolve any disputes and grievances that result from failed transactions.
- The PSO should also offer its network of Payment Service Providers (PSPs) access to this system for a cohesive resolution.
- This system must equip the customers with the needed tools for recording the dispute irrespective of the transaction’s nature (interlinking needed)
How the end customer experiences the ODR?
- The end customer must have access to lodge their dispute either in a web-based or paper-based format. The options must be more than one, like a call center, mobile applications, IVR, SMS, etc.
- The end customer should be able to access these options via a link or mechanism set in place by the PSO/PSP.
- And in the case of UPI, the Third-Party App Providers (TPAPs) must have an in-built app feature for the customer to raise disputes. This feature will have a direct connection to the PSO’s ODR system.
- Furthermore, the end customer shall only enter minimal details to raise the dispute. The rest must be auto-populated by the system to reduce the end customer’s effort without compromising their privacy.
- The ODR system must assign a unique reference number for every dispute raised, and the end customer must be able to track the dispute using this reference number.
P.S. Here’s a fact that most of us are unaware of:
Do you know that every day the dispute goes unresolved, beyond the turnaround time, there is compensation that must be provided by the PSO?
Yes, it is true. As per RBI guidelines, the turnaround time for UPI payments does attract compensation.
Unified Payments Interface (UPI)
- Dispute relating to the transfer of funds (beneficiary not credited)- Rs. 100 per day for delay beyond turnaround time
- Dispute relating to confirmation of funds (merchant not credited)-Rs. 100 per day for delays beyond turnaround time
Likewise, other payment methods such as ATM withdrawal, IMPS, AePS, and NACH also have their own compensation rules when the dispute resolution extends beyond the turnaround time.
While all this sounds good, there are some challenges that also accompany this system’s implementation, such as
- In case the unique reference number doesn’t work, the end customer might have to create another dispute to follow up on the previous dispute.
- If the system’s built in a very complex and intricate way to protect data privacy, there might be additional resources involved to spearhead the decoding and adaptation of the system.
- If there is no proper catalog of complaints and their nature, it could result in a complicated state where blind spots will be the primary hurdle.
It is a waiting game to see how the ODR will be embraced by both digital ecosystem participants and its members. In the meantime, we have been up to something. Keep watching the space to know more about what it is that we are building!!!
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