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UPI participants must implement Online Dispute Resolution systems by September 30

Otherwise, they risk being barred from onboarding new users.

All participants in the UPI ecosystem are required to implement an Online Dispute Resolution (ODR) system for disputes and grievances related to failed transactions by September 30, 2022, the National Payments Corporation of India (NPCI) said in a circular issued on April 11. This instruction applies to member banks and payments system providers like HDFC Bank and Axis Bank as well as third-party UPI apps like Google Pay, Amazon Pay, and PhonePe.

The Reserve Bank of India had issued a circular in August 2020 mandating all authorised Payment System Operators (PSOs) such as NPCI and their participants to implement ODR systems by January 2021, but “many participants have breached the mandated timeline and are yet to implement and go live on ODR systems,” NPCI noted in its circular.

What is an ODR system?

According to the RBI, an Online Dispute Resolution (ODR) system is:

“A transparent, rule-based, system-driven, user-friendly and unbiased mechanism for resolving customer disputes and grievances, with zero or minimal manual intervention.”

ODR systems are expected to benefit consumers by making dispute resolutions quicker and more efficient compared to the current, traditional dispute mechanisms. They will enable customers to easily lodge complaints and track their status via the apps used for payment. ODR systems are also expected to reduce the burden on banks as lesser manpower and other resources will be involved in dispute resolutions.

Initially, ODR systems will cover failed transactions, but this will later be extended to cover disputes and grievances other than those related to failed transactions, RBI stated in its circular. Other disputes could include chargeback, which arises when there is a fraudulent transaction or issue with the quality of product or service delivered in lieu of the payment.

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“The implementation of such a system shall benefit and protect consumers and will help to increase users’ trust in the UPI ecosystem.” – NPCI

Government think-tank NITI Aayog last October published a report on ODR in which it evangelises the role of artificial intelligence-powered ODR as a fourth party to mitigate arbitration, legal issues in the country’s judiciary, ministries, and its various departments.

Onboarding of new users will not be allowed if ODR systems are not in place: UPI

“It is critical to provide the highest level of priority in making such features to UPI users. Failing to provide this facility to all their users, new customer onboarding for issuer banks, PSP (payment system providers) banks, and TPAPs (third-party application providers) shall be stopped effective from 1 October 2022. This is also applicable for multi-bank TPAPs and they shall only be permitted to onboard new customers ONLY on enabled PSPs post this date.” – NPCI

“All participants must also ensure that credit and reversal processing is enabled as part of the implementation,” NPCI said

NPCI has given until September end for UPI participants to implement ODR systems and has stated that no extension will be considered. It has also advised UPI participants to make this functionality available well before 30 September in order to ensure “seamless go-live.”

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