A significant update is on the horizon for Unified Payments Interface (UPI) users. The National Payments Corporation of India (NPCI) has introduced revised guidelines concerning UPI transactions. These updated rules primarily target the automatic acceptance and rejection of chargebacks and will come into force on February 15, 2025.
Introduction of Auto Chargeback Process
NPCI has decided to streamline the chargeback process by implementing an auto chargeback mechanism. Under this system, automatic acceptance and rejection of chargebacks will be governed by the Transaction Credit Confirmation (TCC) and the Immediate Transaction Information (ITI) generated in the next settlement cycle following a chargeback raised by the beneficiary. This new approach will only apply to bulk uploads and UDIR, excluding front-end options.
Beneficiary Bank to Play a Key Role
The determination of whether a chargeback will be accepted under the revised rules will depend on the actions taken by the beneficiary bank. The bank’s decision to raise a TCC or initiate a return will dictate the acceptance or rejection of the chargeback. This automation aims to reduce the need for manual intervention, thereby improving efficiency.
Current Chargeback Challenges
Presently, disputes over UPI transactions often escalate into chargebacks. Customers can initiate chargebacks on the same day as the transaction due to limited verification and processing time available to banks. This puts pressure on beneficiary banks, making it difficult to handle disputes promptly. The new auto chargeback process is expected to alleviate this issue by reducing the reliance on manual processing.
Understanding Chargebacks
A chargeback refers to the reversal of a completed UPI transaction due to disputes, fraud, or technical issues. It is initiated by the payer’s bank to recover the transaction amount for the customer. This situation typically arises when a customer does not recognize a payment or raises concerns regarding the transaction. Chargebacks are also common when goods are not delivered, there is an error in transaction processing, or the merchant charges the customer twice.
Chargebacks vs. Refunds
It is essential to distinguish between a chargeback and a refund. A refund is initiated by the customer directly through the service provider, such as a UPI app or a merchant. Conversely, a chargeback involves the customer requesting the bank to recover funds directly. The new rules aim to streamline the chargeback process and enhance user convenience while reducing the burden on banks.
