Whether it is breaking its own record of total transactions or adding new features, UPI has scaled many peaks since its launch in 2016. UPI transactions in November 2022 crossed 731 crore in volume amounting to a whopping Rs 11.90 lakh crore.
In December 2022, the Reserve Bank of India said it would add new features to the UPI (Unified Payments Interface) platform.
While making the announcement, RBI governor Shaktikanta Das said, “The UPI has emerged as the most popular retail payments system in India. It currently includes functionality to process payment mandates for recurring as well as single-block-and-single-debit transactions.”
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He further added that UPI’s capabilities will be further enhanced with the introduction of single-block-and-multiple-debits functionality.
“This facility will enable a customer to block funds in his/her account for specific purposes, which can be debited whenever needed. This will significantly enhance the ease of making payments for investments in securities including through the Retail Direct platform as well as e-commerce transactions,” Das said.
What is the New UPI Feature?
Single-blocking-and-multiple-debit is set to have a long-lasting impact on India’s digital payment space. A handful of industries as well as customers are going to benefit from it.
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Let’s understand what single-blocking-multiple-debit features on UPI is all about and how it’s going to affect digital payments.
What is single-blocking multiple-debit?
Till now, UPI allows customers to make recurring payments using UPI AutoPay. It means that customers can block money in their account for a particular type of payment, usually recurring payments. However, merchants can only debit the money once from the customers’ accounts.
With the new feature, merchants can make multiple debits as agreed upon with customers from the amount blocked in customers’ bank accounts.
In essence, this means that when a customer buys something online, this feature will allow them to block the money in their account, which will be released to the merchant once the customer has received the product or service.
In a statement, the RBI said, “This will build a higher degree of trust in transactions as merchants will be assured of timely payments, while the fund remains in the customer’s account till the actual delivery of goods or services.”
What are the Use Cases of Single-Block-Multiple-Debits?
Once this feature goes live, multiple industries will benefit from it. Some of the sectors that will see immediate use cases include the following:
- E-commerce
Although digital payments have seen a rise in adoption, still a lot of e-commerce companies have to deal with cash on delivery (COD). COD payments are not easy as merchants have to deal with cash. Then there is always an added risk that the customer will not be available to pick up the product or pay for it.
Single-block-multiple-debits is likely to reduce COD payments as customers don’t have to worry about losing or paying money before they receive the product. This feature will ensure that the merchant can debit customers’ accounts only after the latter receives the product.
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It’s quite beneficial for merchants too as they don’t have to worry about COD payments. They also have surety that the customer will pay for the product as the amount gets blocked at the time of placing the order.
- Recurring payments
For merchants whose business model revolves around recurring payments, single-block-and-multiple-debits will be a boon. Until now, merchants were able to debit customers’ bank accounts only once for recurring payments via UPI AutoPay mandates.
However, once this new feature goes live on UPI payments rail, merchants will be able to make multiple payment debits as mutually agreed with the customer. So industries like edtech, OTT, grocery, furniture rental, etc will benefit from this feature.
In the coming days, RBI will provide NPCI details of how multiple debit functions will work for customers and merchants.
Every month, over 70 lakh UPI AutoPay mandates are handled by NPCI.
- Secondary capital market
In addition to these two use cases, RBI said single-block-and-multiple-debits will also be useful for the purchase of securities in the secondary capital market, and buying government securities using RBI’s Retail Direct scheme.
