UPI 101 - Exploring the Native Payment Method-Part 3
Hey, it is time for a curtain call for our UPI series, and it covers all about what happens when your payment gets stuck. Our first part was about the UPI's origin and the second part, its footprint across the globe.
Our final part of this series covers the most overlooked part- What happens if a payment is stuck or in case of a UPI dispute?
Let’s march on;
Imagine you are sending money to your friend using UPI!
All you need to do is enter your UPI ID, the amount, and the PIN, and then you tap on the send button. You expect to see a confirmation message on your screen, but instead, you see a message or icon indicating that it is taking some time to credit the payment. Then you get a message that the amount is debited but it is taking some time to effect the credit.
Usually, this scenario often resolves on its own, but sometimes your payment does get stuck and what you can do to resolve is what follows next.
This is an example of a UPI dispute and it can happen due to various reasons, such as network issues, server timeout, etc.
Currently, it is the URCS that clears these issues, before we proceed further, here’s a short intro about URCS
Full form: Unified Real-time Clearing and Settlement
Role: URCS is NPCI’s Back Office System, which supports banks to raise/act on disputes.
The most common UPI dispute scenarios are;
- Debit Reversal Confirmation (DRC)
- Deemed Credit
- Payment to Merchant (P2M) Disputes
Debit Reversal Confirmation (DRC)
In a Debit Reversal Confirmation transaction, a timely response is the key
When the Remitter bank’s response is not received or if they fail to send a response, NPCI triggers a timeout mechanism for the transaction.
As a result, NPCI sends a reversal message to the Remitter bank. Additionally, it also communicates with both the Payee and Payer PSPs by sending a timeout message.
Mechanics of DRC:
- The Payer PSP raises a complaint with UPI for a transaction with an unknown status and notifies the customer once it’s under review.
- UPI then forwards the request to URCS
- URCS validates the transaction, creates a complaint record, and responds to UPI if it’s a DRC with no dispute raised.
- UPI then notifies the same to Remitter for further process
- The Remitter will then check the CBS (Core Banking System) and respond to UPI with one of the reasons below:
a. Debit Reversal was performed online.
b. Debit Reversal has been processed now.
c. No online debit occurred.
d. Unable to Update (UTU)
6. UPI updates URCS status and raises a complaint/chargeback based on TAT for UTU or timeouts.
7. The final response is then sent to the Payer PSP.
8. UPI notifies the Payee PSP or Beneficiary about the dispute status.
Deemed Credit
In certain UPI transactions, if the Beneficiary bank’s response doesn’t reach NPCI, it’s known as a Deemed Credit, and as a result, appropriate responses are sent to Payee and Payer PSPs.
- The Payer PSP files a complaint with UPI about the transaction’s unknown status and informs the customer after receiving UPI’s acknowledgment that the complaint is under review.
- UPI promptly forwards the request to URCS
- UPI then initiates a complaint directed towards the Beneficiary.
- The Beneficiary conducts a review within their CBS (Core Banking System) and responds to UPI with one of the following responses:
a. Credited Online.
b. Not yet credited but will be credited shortly.
c. Unable to Update.
d. Unable to process the credit and return will be initiated
6. UPI updates URCS status, and for UTU or timeouts, complaints/chargebacks are raised based on predefined TAT guidelines.
7. The final response status is communicated to the Payer PSP.
8. UPI ensures that notifications are sent to the Payee PSP or Remitter regarding the status of the complaint.
P2M Disputes
Definition: Amount Debited but Goods/Service not delivered or any other service-related issue.
In certain situations, funds are deducted from the payer’s bank account, but the merchant doesn’t receive confirmation. This can lead to the customer not receiving the goods or services they paid for.
In these situations, the payer would have already raised the complaint stating the amount has been debited but there’s an inaction on the merchant’s side.
Usually, these types of transactions can be handled in three different ways, for example;
Note: Here the term “Payee” stands for the Acquirer aka the merchant’s banker.
Case 1: If the transaction was successful at the Payee’s end, it will send the confirmation to the merchant. Based on that confirmation, the merchant will deliver the goods along with the delivery details (if the product has already been dispatched). If not, the payee can also process the refund and update the merchant.
Case 2: If the Payee responds with “Unable to Update” or for situations where credit isn’t processed for canceled or returned goods, UPI forwards the case to URCS. URCS will then initiate a Chargeback (after T+3) with a specified reason code and follow the existing chargeback procedure. If the complaint is raised within T+3, it will be automatically converted into a Chargeback if no action is taken on it.
Case 3: If the Payee intends to refund the customer, they respond with “Refund will be initiated,” and a complaint is raised in URCS. The response to the Payer/User is that the complaint has been raised. Following this update, the Payee must separately initiate a refund transaction. Once the refund is successfully processed, the system will close the complaint.
