PhonePe, GPay, Paytm UPI: The RBI has said popular retail payments system UPI will soon have a new functionality — single-block-and-multiple-debits. It said the feature, once rolled out, will enable a customer to block funds in his/her account for specific purposes, which can be debited whenever needed.
In the e-commerce transaction, no online payment and no cash-on-delivery, this new UPI feature will bring a unique payment system for users. Here’s everything you must know about the unified payment interface’s single-block-and-multiple-debits functionality, including its uses and benefits.
Also Read: From UPI Changes To Gold Hedging Rules Tweak; RBI’s 7 Key Decisions You Must Know
Currently, the UPI has a functionality to process payment mandates for recurring as well as single-block-and-single-debit transactions.
What Is UPI Single-Block-And-Multiple-Debits Facility?
The single-block-and-multiple-debits functionality will assure merchants of timely payments, and the buyers will also be able to pay after the delivery is done. Using this feature, a user can block an amount for a specific purpose like placing an order from an e-commerce platform like Amazon and Flipkart, among others, which can be debited, whenever needed.
In What Cases Will It Be Used?
The single-block-and-multiple-debits functionality of the UPI can be used for purposes including the following:
1) E-commerce transactions
2) Hotel bookings
3) Purchase of securities in the secondary capital market
4) Purchase of government securities using the RBI’s Retail Direct scheme.
Currently, UPI has features that enable processing of mandates for recurring transactions and single-block-and-single-debit functionality. “Consequently, over 70 lakh autopay mandates are handled every month and more than half of Initial Public Offer (IPO) applications are processed using the block feature of UPI,” the RBI said in a statement.
How Will It Be Used In E-Commerce Orders?
Currently, e-commerce has two major payment options — prepaid (online payment) and postpaid (cash-on-delivery). In the case of the former, many customers are skeptical and prefer payment after delivery. However, in the latter system, the merchants have a payment risk. So, under the new system, a customer can give a mandate to the merchant whereby a certain amount will be blocked to purchase goods and once the goods are delivered, the money will be debited.
How Is It Helpful For Both Customers And Merchants?
As the amount is not deducted and it is just blocked until the goods are delivered, the customer will be okay with that. The funds remain in the customer’s account till the actual delivery of goods or services. Merchants, on the other hand, will also be assured of timely payments once the goods are delivered, as the mandated amount is already blocked.
“This will build higher degree of trust in transactions as merchants will be assured of timely payments, while the funds remain in the customer’s account till actual delivery of goods or services,” the RBI said in the statement
Shilpa Mankar Ahluwalia, partner, head (fintech) at Shardul Amarchand Mangaldas & Co, said, “The latest feature linked to the single-block-and-multiple-debits facility will benefit both consumers and merchants by allowing consumers to make payment after the occurrence of certain events (like receipt of goods) while eliminating payment risk for merchants. This is an important use case given that most digital payments follow the delivery-after-payment model.”
Detailed instructions to the National Payments Corporation of India (NPCI) will be issued shortly, the RBI has said in a statement.
What Is RBI’s Decision On Bharat Bill Payment System?
The RBI has also decided to enhance the scope of BBPS payments to include all categories of payments and collections, both recurring and non-recurring, and for all category of billers (businesses and individuals). It will allow individuals to make payment of fees for professional services, education fees, tax payments and rent collections, among others.
Currently, BBPS handles recurring bill payments for merchants and utilities and does not cater to nonrecurring bills.
Akash Sinha, CEO and co-founder of Cashfree Payments, said “The RBI’s announcement with respect to UPI payments and Bharat Bill Payment System (BBPS) are encouraging in the payments ecosystem… This will make it more convenient to make payments towards investments in securities through the RBI’s Retail Direct platform and e-commerce transactions. The RBI has been working towards boosting the efficiency and effectiveness of BBPS, to facilitate and accelerate the adoption of cashless payments.”
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