Chinks in UPI armour begin to show; users lose money on failed transactions

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United Payments Interface (UPI), the government's flagship digital payments medium, promoted by Prime Minister Narendra Modi, seems to be struggling.

People transacting on UPI claim these frequently fail, with no recourse from either banks or National Payments Corporation of India (NPCI), which runs the platform.

Some complain they have not got their money back even though the app said the transaction was successful -- the money wasn't credited in the receiving bank account. These users told their respective banks and NPCI -- all they found was a longdrawn process of back-and-forth. Involving a long paper trail, screenshots of transactions and relentless tweeting.

Failiure details

One such aggrieved user is Madhusudan R from Chennai, who runs his own payments start-up. Madhusudan told Business Standard he'd tried to transfer Rs 30,000 through Google's Tez payments app on January 31. The money has still not reached the receiver's account.

"The app said transaction successful; the money wasn't credited into the bank account. I reached out to my bank, Citibank, which said the money went from their end; Google Tez said the same thing," he said.

Madhusudan then approached the receiver, Indian Overseas Bank. And, found the bank manager was clueless on how to get the money back. "Somewhere it [money] got stuck, IOB in this case; they have not been doing reconciliation or a refund. We really don't know where to reach out to get this money. There's no reporting mechanism with NPCI. They only respond to Twitter and then keep asking for more information," he said.

Though NPCI had increased the penalty for UPI eco-system participants such as banks and apps for not doing reconciliation of failed transactions on time to Rs 25, through a circular in December, those in the know say that it hasn't resulted in much improvement of success rates.

Dilip Jain, a senior engineer at payments company Juspay, blames banks for shoddy UPI implementation. He says payment apps are sometimes unable to provide acknowledgement of money transfer to the merchant on time. So, the customer is denied products and service.

"Sometimes, the implementation is bad, there are reliability issues and no recourse. Customer money is already debited but since there is no acknowledgement, the merchant won't service the customer," he explained.

Jain adds that UPI is a network. Meaning, it depends on the up-time (a measure of the time its computers are working and available) of the banks, both payee and payer. For instance, a big private sector bank will have 99.99 per cent up-time while a small public sector bank will have an up-time of only 80 per cent, which can cause challenges.

While there are some who have their money stuck between banks, many others are resorting to Twitter to complain with NPCI, in the absence of satisfactory follow-up from their own banks.

Jibin Sabu, a management professional from Kochi, paid Rs 1,894 on March 1 through the PhonePe UPI app on Flipkart for his online shopping. The transaction failed, in that Sabu's money got deducted from the bank account but PhonePe's systems didn't reflect the credit of the money. He took it up with the app's customer care section but found them unhelfpul.

"It was a technical glitch, where the transaction information was not reflected in their account. The customer support team was also badly organised; they didn't even check their bank to confirm this transaction," he said.

Sabu then wrote to Flipkart and PhonePe over e-mail and his transaction was refunded to him on March 8. The experience left him feeling angry on the lack of recourse options.

"The technology needs to be much better and the apps should have a direct customer support line or details of whom to contact other than just a message to call the bank's support, which never is attended by anyone," he said.



Even as transaction failure rates are a cause of concern among consumers, there's no official data on exactly how many transactions are failing. The Watal committee report on digital payments said big banks were denying transactions to smaller banks, something last year's official Economic Survey also noted.

Amol Kulkarni, at CUTS International, an organisation that works in the area of consumer protection, says there is huge lack of transparency at NPCI. This needs fixing at the earliest, with a regulator to look over things.

"NPCI is a body floated by banks, which works for banks' interests. So, they can't really force banks to let transactions go or improve their systems. It prefers to keep the failure rates secret and the reasons behind these. This hurts the market. NPCI should also be regulated and be kept to higher standards than other players in the market," he said.


‘Look, we are trying’

A P Hota, former chief executive of NPCI, said the failure rate of UPI transactions was about 10 per cent last year, when he left the office. It could not, at worst, be 15-20 per cent. 

“There were failures and downtime from the banks’ side but they were sorted at that point. Now, the volumes have gone up too much. So, maybe it’s an issue of capacity of the systems which could be crumbling or maybe there’s something else at work,” he said. 

Adding “NPCI is still finding its feet and is maturing. So, expecting them to be completely transparent right away is not possible but, going forward, I am sure all the data on failure rates and other issues will be put out.”

NPCI declined to comment for this report. However, a top official at the corporation said there were systems in place for failure reporting in each UPI app. He acknowledged that transactions do fail and get stuck between banks but claimed this was largely due to volumes putting pressure on the system. 

“Banks are adding capacity but the growth in transactions is much higher than capacity addition. So, these problems are bound to arise. There is a help desk of about 10 people at NPCI, too, which works round the clock. But, we don’t advertise it much because we don’t want people to call. Every call costs us about Rs 60. So, we prefer to receive complaints through Twitter or through the app,” he said. The official added they were trying to reduce the failure rates and it had been brought down from 10 per cent to about two per cent. The benchmark was to reach a one per cent failure rate.


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