NPCI looking to stop cons ‘pulling’ a fast one via UPI
Mar 18, 2025
Synopsis
NPCI plans to phase out ‘collect’ calls for merchant payments to curb UPI fraud. Authorities prefer ‘push’ transactions like QR code payments. Fraud cases in digital banking are rising, prompting stricter verification measures.
The National Payments Corporation of India (NPCI) is working to phase out ‘collect calls’ for merchant payments as part of the government’s efforts to combat online frauds via the Unified Payments Interface (UPI), two bankers familiar with the matter said.
A collect call is a ‘pull’ transaction, where a merchant initiates a payment request to the customer. Given that merchants have a higher degree of control over these, there is a more chance of fraud.
Authorities are instead encouraging ‘push’ transactions, where the customer initiates the payment by scanning a QR code or through other means.
“The idea to stop collect calls for merchant transactions is to stem frauds that take place through this process.. It will happen gradually,” one of the bankers told ET.
The initiative comes amid a massive growth in frauds in the rapidly expanding digital payments ecosystem. According to data from the Reserve Bank of India (RBI), in the first six months of FY25, 13,133 fraud cases were reported for cards and digital banking platforms, involving Rs 514 crore. In FY24, the number of scams in digital banking stood at 29,082, with Rs 1,457 crore lost.
“The government and the central bank want to reduce frauds,” the second banker cited earlier said. “Since most consumers have anyway gotten used to QR codes and other (such modes), the consensus in the industry is that collect payments can be done away with.”
Keeping it verified
Currently, many merchants display a QR code on the checkout page, which customers can scan to make payments.
A bulk of online UPI payments are through Google Pay and PhonePe. In such services, the customer selects the app for payment and authenticates a UPI handle while transacting. The merchant is typically verified by the payments platform and chances of fraud are low.
Typically, fraudsters create websites for fake products and services and take money from unsuspecting customers through collect call transactions, the banker said. It is easier for them to get away with it because no bank or payment aggregator is undertaking the KYC (know your customer verification) of such merchants, he added.
While such pull transactions are being phased out for merchants, for peer-to-peer (P2P) payments, NPCI has brought in a limit to such payments. “P2P payments have already been restricted to less than Rs 2,000, and that is anyway less than around 3% of the total P2P transactions right now,” the banker said.
Overall, collect payments on UPI lost flavour over the years, with most of the large online merchants such as Flipkart, Amazon and others integrating with UPI apps via payment aggregators such as PhonePe and Paytm. Volumes of collect payments on such merchant transactions would be less than 3% currently, the banker said.
In February, UPI clocked 16 billion transactions out of which 10 billion were merchant payments, showing the popularity of UPI among Indian consumers.
To ensure that large merchants can continue to use all forms of UPI payments, NPCI wants payment aggregators and banks to ‘verify’ large merchants, the first banker said.
“The problem is that there is no clarity yet on what kind of merchant verification is being sought here, and who will do the verification. Eventually, I believe this payment flow will just die a slow death,” he said.
ET reported on March 17 that the recovery rate for fraudulently withdrawn funds is around 10% for three years till 2022, showing the challenges of returning stolen money to the victims.
[The Economic Times]
