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Whose refunds is it anyway: A look at UPI’s underprepared redressal mechansim

Following the demonetization of Rs 500 and Rs 1,000 notes, the Unified Payments Interface (UPI) has seen a surge in the number of transactions. Provisional data from the Reserve Bank of India (RBI) showed that the number of UPI transactions hit 2 million with the total value of them at around Rs 700 crore in the month of December 2016. In November 2016, the total number of transactions on UPI were around 300,000 with a total value of Rs 90 crore.

However, it seems that there are still structural issues and many transactions on the platform are failing and customers have not been able to get refunds to their bank accounts. The problem is exacerbated by the fact that there is no API for refunds from banks at the moment.

Though the National Payments Corporation of India (NPCI), banks and payment apps have been fielding transaction failures and refund requests there does not seem to be a proper mechanism to enable them. In fact, Sampad Swain, CEO of payments company Instamojo,  had taken to Twitter to raise the issue that there is no API for refunds from banks at the moment.

Operational guidelines for the UPI points out that customer complaints for failed transactions and refunds should by the payment system provider (PSP) or banks. From the guidelines:

Any complaint about credit not being given to a beneficiary should be dealt with conclusively and bilaterally by the remitting and beneficiary banks as per the guidelines circulated by NPCI from time to time.

In case of any complaints related to UPI transactions, the first point of contact for customer will be the customer’s PSP. Customer’s PSP has to mandatorily provide option in their App to raise dispute/complaint by providing transaction reference/Id number. However, if customer decides to approach his/her remitter/beneficiary bank instead, the respective banks shall entertain all such requests and help to resolve the complaint to the customer’s satisfaction.

Speaking to MediaNama, a CEO of payment gateway requesting anonymity, confirmed some of the issues raised in Swain’s tweet. The source added that their gateway gets around 1,000 requests a day for refunds on the UPI. “And now we are doing 2000-3000 UPI transactions a day,” he added. “Refunds in UPI is becoming a hassle. We are expecting things to become more easier once banks come up with their refund APIs.”

“The refunds are not streamlined on the UPI right now. The only mechanism for this was a batch file system. You send a batch of refund requests to the bank. The bank would process the file and then that’s it. The banks won’t even confirm whether the refunds was being processed or not,” the source said.

The source also mentioned that right now there are no arbitration guidelines in place for banks which are sending a payment out and a bank which is receiving a payment on the UPI.

Demonetization messed with rollout plans 

The source however pointed out that the UPI wasn’t supposed to scale this quickly and that banks were overwhelmed with the influx of transactions following the demonetization move on November 8. Note that the UPI was only launched in August 2016.

“Banks did not have time to fix these APIs and we were assured by the senior management that it would be done.” The source’s payment gateway has partnered with ICICI Bank and he added that it now has a refund API which they need to deploy. MediaNama has written to ICICI Bank for a confirmation and will update once they get back to us.

Sources in the payments industry who spoke to MediaNama also added that the second version of the UPI slated for release in March 2017 would have have more detailed measures for refunds and including an API from the NPCI itself.



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