The National Payments Corporation of India (NPCI) has announced a major update to the Unified Payments Interface (UPI) chargeback process, set to take effect from February 15, 2025. This change is primarily focused on automating the acceptance and rejection of chargebacks, streamlining the dispute resolution process, and improving efficiency in UPI transactions. By eliminating manual intervention, NPCI aims to enhance the overall experience for banks and users alike while reducing the risk of penalties imposed by the Reserve Bank of India (RBI).
At present, chargebacks are initiated by remitting banks starting from T+0 through the Unified Dispute Resolution Interface (UDIR). However, due to time constraints, beneficiary banks often struggle to complete the necessary reconciliation processes before return requests are processed. This mismatch frequently results in rejected return requests despite chargebacks having already been initiated. In turn, this leads to regulatory penalties and operational inefficiencies for banks, creating confusion and potential financial loss for customers.
To address these challenges, NPCI is implementing a new framework using Transaction Credit Confirmation (TCC). Under this system, chargeback requests will be automatically accepted or rejected based on predefined criteria, eliminating the need for manual intervention by bank officials. This will not only speed up the dispute resolution process but also prevent unnecessary delays that often cause frustration for users and inefficiencies for financial institutions.
One of the most critical aspects of this update is that it allows beneficiary banks additional time for transaction reconciliation before chargeback requests are processed. This ensures that banks can verify transactions thoroughly, reducing errors and preventing unnecessary disputes. The new rule applies specifically to bulk uploads and transactions processed through UDIR, while front-end dispute resolution mechanisms will remain unchanged.
Chargebacks occur when a UPI transaction, initially authorized, is later reversed due to various reasons. Common scenarios include customers disputing transactions they do not recognize, claiming they were charged for undelivered goods or services, or reporting duplicate payments. Additionally, technical issues such as system glitches or processing errors may also result in chargebacks. These disputes require banks to conduct thorough investigations to determine the validity of a chargeback request and ensure that funds are returned appropriately.
By introducing an automated approach to handling chargebacks, NPCI aims to reduce the complexity of disputes, minimize delays, and ensure that reconciliation is carried out smoothly. The move is expected to significantly cut down on regulatory penalties, prevent financial discrepancies, and improve overall transaction efficiency. With UPI being the backbone of digital payments in India, these changes will reinforce its reliability, making transactions more seamless and hassle-free for both banks and consumers.
Ultimately, this initiative is a step forward in enhancing the robustness of India’s digital payments ecosystem, ensuring that UPI remains a trusted and efficient mode of financial transactions for millions of users across the country. The introduction of automation in chargeback processing not only aligns with global best practices but also signals a move toward a more secure and reliable payment system, benefiting businesses, banks, and customers alike.
