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UPI Circle: Payments made easy by delegate solutions

Unified Payments Interface (“UPI”) has been a game-changer in the payments landscape and clearly India has been at the helm of it. The innovation head start is now taking another leap to secure its vantage position by bringing in the concept of “UPI Circle” — a new initiative aimed at enabling delegated payments. To simply put UPI Circle, further allows the Primary users i.e the individuals with UPI linked accounts to further delegate it to connected users to make payments using the Primary user’s UPI linked account. National Payments Corporation of India (“NPCI”), vide office circular dated 13 August 2024, introduced and outlined the operational features of UPI Circle.

We all have been in a situation where we have made a UPI transaction using picture of whatsapped QR codes or UPI id on behalf of our kids, house help, driver etc. It would be correct to say that in such transactions both secondary users and Primary users lack the much-needed flexibility of having hassle free small transactions.

The primary reason why majority of secondary users don’t have UPI linked account is their dependency on cash for their daily payment needs, as they do not manage their own money through their own account. Using UPI Circle, a Primary user can authorize a trusted secondary user for performing transactions within the security protocols / limits. The nature of delegation can either be full or partial, depending on what kind of access the Primary wants the secondary to have to the account.

Full Delegation: If Primary user is of the opinion that a secondary user is trustworthy of being given the authority to initiate and complete UPI transactions via Primary user’s UPI linked account, the same can be done by way of full delegation. At present, under full delegation there exist a limit of INR 15,000 per delegation and maximum per transaction limit of INR 5000.

Partial Delegation: However, if Primary user is of the opinion that secondary user though trustworthy but need not have unchecked access to Primary user’s UPI linked account, the same can be done by way of partial delegation, where the Primary user not only authorize initiation of payment requests from secondary users, but also completes the UPI transaction with the UPI PIN. For partial delegation, existing UPI limits shall be applicable.

UPI Circle has notched up the idea of flexibility with control in digital payments’ landscape. For instance, a mother can give full delegation to her kids to initiate and complete payments. The cool feature of full delegation in UPI Circle is that, while the kids will have access to mother’s account, the mother can keep tab of where and how much money has been transacted by the kids.

With partial delegation feature, a Primary user may give partial delegation to house- help allowing the required flexibility of making payments and at the same time the Primary user can retain control over the transaction.

Things to watch out for?

The success of UPI is impressive, but we can’t ignore the costs that many inexperienced users have faced. The users of UPI Circle have to be cautious of aspects like unauthorized transactions via UPI Circle, risk associated with allowing access to sensitive information like bank details and personal data to secondary users.

With its promise of more flexibility, “UPI Circle” could become a key part of India’s growing digital economy. However, without a comprehensive framework on security protocols pertaining operationalising UPI Circle, its early usage will be crucial in deciding its long-term success in the digital payments’ ecosystem. We shall keep our readers posted on how the framework on UPI Circle unfolds.

 

AUTHORS: Shruti Dvivedi Sodhi (Partner) | Lovina Ropia (Associate)

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