How this one UPI rule caused chaos for market leaders
What's the story
The National Payments Corporation of India (NPCI) recently attempted to promote consumer choice and interoperability among third-party Unified Payments Interface (UPI) apps. The move was aimed at leveling the playing field for all players in the digital payments space. However, it has led to confusion among users and friction between apps, prompting NPCI to step back and broker a fragile truce.
Feature details
What is the UPI Mapper tool?
The NPCI's new rule requires all third-party UPI apps (TPAPs) like PhonePe, Google Pay, Paytm, CRED, Amazon Pay, BHIM and Navi to let users select their preferred app for receiving payments. This is done through a tool called the UPI Mapper. The feature links a user's UPI ID with their mobile number and was previously automatically linked to the first app they signed up with.
User impact
The mapper's impact on transactions
The NPCI's new rule has led to transaction delays and failures. This is because every time two users transact using their mobile numbers, the system has to ping NPCI servers multiple times. While this isn't a major issue, it doesn't help anyone in the ecosystem either. The change was made to prevent market leaders from entrenching their dominance in UPI by allowing local searches for UPI addresses within the same app.
User confusion
Confusing customers
The NPCI's new rule has led to a race among UPI apps to get customers to make them their primary app for receiving money. This has resulted in a lot of notifications and display messages on home screens, confusing customers. Many users unknowingly accepted the request thinking they had to do so for receiving money through UPI.
User distrust
Customers started distrusting UPI platform and apps
The confusion caused by the NPCI's new rule has led many customers to distrust the UPI platform and the apps. This was especially true for those who didn't understand what was happening and were expecting to see transactions in their primary UPI app. The situation got so bad that thousands of complaints were registered from customers claiming they didn't receive money when using a new app.
Rule reversal
NPCI reverses order to restore peace among players
The chaos caused by the new rule forced NPCI to reverse its order in a bid to restore peace among UPI players. The decision was made after smaller apps started gaming the system, creating more confusion for customers. Now, instead of sending messages or nudges to change their primary app, UPI apps can only offer this option within a customer's account profile.