Growth comes with glitches: It’s not easy to recover money lost in UPI transfer

After tremendous month-on-month growth in UPI transactions, reports of faults in the transaction system have started pouring in.

Imagine transferring some money to the account of a friend or family, who is in dire need of funds, through a UPI-based app. Hours, days, weeks and months pass by, and your friend never gets the money.

Meanwhile, you run from pillar to post, from the payee’s bank to the app company, to find out where the money vanished. Both insist they successfully transferred the money from their end.

The receiver bank says they haven’t received the money, or the payment is stuck, and they have no idea how to get the money back.

On top of it, you find out that National Payments Corporation of India (NPCI), an umbrella organization for all retail payments in India, has no mechanism to address such issues. They only respond to Twitter and keep asking for more information.

Madhusudan R, a Chennai-based entrepreneur, who runs his own payments start-up, faced a similar problem, a Business Standard report said.  

He tried to transfer Rs 30,000 through Google's Tez payments app on January 31. The money never reached the receiver's account.

Madhusadan is not the only UPI user who has faced this situation; there are many who have suffered losses owing to technical glitches in UPI transactions.

AP Hota, former chief executive of NPCI, admitted to the newspaper that the failure rate of UPI transactions was about 10 per cent last year when he left office. It could have risen to 15-20 per cent.

Tech-based payments firms have directly passed the larger blame on banks for the failure of UPI-based transactions.

Dilip Jain, a senior engineer at payments company Juspay, blamed the banks for shoddy UPI implementation.

According to the Business Standard report, he explained that UPI is a network which depends on the up-time (a measure of the time its computers are working and available) of 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.

The Watal committee report on digital payments also noted big banks were denying transactions to smaller banks.

Consumers’ rights activists have red-flagged the lack of transparency at NPCI. They are demanding that it be fixed at the earliest, with a regulator to look over things.

However, optimists believe that NPCI is still at the nascent stage and the digital transaction ecosystem needs time to reach maturity. They believe that going forward, it will become more transparent when it will be able to address all uses related to digital payments, including UPI.