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National Payment Corporation of India (NPCI) on 22nd July 2020, launched UPI AutoPay for recurring payments using the UPI trail. This facility is a part of UPI 2.0!
What is UPI AutoPay?
UPI AutoPay is a feature that allows customers to enable e-mandate using any UPI application without having to enter a PIN for every recurring payment such as mobile bills, electricity bills, EMI payments, insurance, mutual funds among others.
UPI AutoPay feature benefits both users and merchants as UPI mandates are generated instantly and payments get deducted automatically on the authorized date.
A business can set the mandate for one-time, daily, weekly, fortnightly, monthly, bi-monthly, quarterly, half-yearly and yearly recurring payments.
How does UPI AutoPay work?
- A merchant that wants to offer recurring payments via UPI AutoPay needs to register with a recurring payments service provider like Cashfree Payments that supports UPI AutoPay.
- Merchant can offer the user the option to create e-mandate through UPI ID, QR scan or Intent.
- On receiving the e mandate authorization request, the user can open a UPI app, go to the mandate section, review the mandate details, select the bank/debit card and enter the UPI PIN to authorize the e mandate.
- Once the user authenticates, the bank account linked with the UPI ID will get auto-debited and the amount will flow to the merchant’s account as per the terms of the recurring payment.
Learn more about UPI Integration here.
List of banks and UPI apps live on UPI AutoPay
Which App Supports UPI AutoPay?
Since the launch of UPI AutoPay by NPCI, 5 apps have gone live on UPI AutoPay.
|5||Indusind Bank App|
In fact, BHIM (Bharat Interface for Money) the mobile payment App developed by NPCI is the first UPI based app to support the UPI mandate feature.
Which Banks Support AutoPay?
Furthermore, these are the list of banks that are live on UPI Autopay.
|Sr. No.||Bank Name|
|5||Capital Small Finance Bank|
|7||Bank of Baroda|
|8||Karur Vysya Bank|
|10||Bank of India|
|11||IDFC First Bank|
|12||Paytm Payments Bank|
|13||Jio Payments Bank|
|15||Punjab National Bank|
|16||NORTH EAST SMALL FINANCE BANK|
|18||Pragathi Krishna Gramin Bank|
|19||Punjab and Sind Bank|
|20||Kerala Gramin Bank|
|21||Rajkot Nagrik Sahakari Bank|
|23||Thane Janta Sahakari Bank|
|24||SBM Bank India Ltd|
|25||Shivalik Merchantile Co-operative Bank|
|26||State Bank Of India|
|27||Patan Nagarik Sahakari Bank|
|28||Saraswat Co-operative Bank|
|29||Utkarsh Small Finance Bank|
|30||Yes Bank Ltd|
|31||Central Bank of India|
|32||Suryoday Small Finance Bank|
|33||Kotak Mahindra Bank|
|34||Equitas Small Finance Bank|
|35||GP Parsik Sahakari Bank|
|36||Capital Small Finance Bank|
|37||The Vijay Co-operative Bank|
|38||Union Bank of India|
|39||Indian Overseas Bank|
|40||AU Small Finance Bank|
|41||The Adarsh Co-operative Urban Bank|
|43||NSDL Payments Bank|
|44||Bank of Maharashtra|
Introducing UPI AutoPay on Cashfree Payments Subscriptions
We have added UPI AutoPay as authentication mode on our recurring payments platform Cashfree
Setting Up Recurring Payments with Cashfree Payments Subscriptions
With Cashfree Payments, you can set up subscriptions and create a great experience for your customers while minimising engineering investment. Cashfree Payments Subscriptions is fast to configure, preview, test and deploy.
Here is how Cashfree Subscriptions works
Check out the integration guide for step-by-step instructions.
Register With Cashfree Payments To Enable UPI AutoPay
Creating UPI mandate using Cashfree Payments Subscriptions UPI AutoPay is a simple process. Check out how Cashfree Subscription is the fastest and easiest way to enable recurring payments. (UPI AutoPay mandate flow on WhatsApp included)
For our existing Cashfree Payments Subscriptions users, UPI AutoPay will be directly enabled on merchant accounts. If you wish to integrate UPI AutoPay on Subscriptions you can register with us here.
Have any questions? Please let us know in the comments section.
Comparing UPI AutoPay and other recurring payment methods
The recurring bill model in India can be enabled through these options:
- Standing Instruction on Credit Card or Debit Cards
- Electronic Clearing House (ECS)
- National Automated Clearing House (NACH) and E-Mandate
- UPI Autopay
Let us compare UPI AutoPay and other recurring payment methods.
Did you know?
The maximum amount for any one transaction with physical mandates is Rs 1,00,00,000 (1 crore or 10 million).
Standing Instruction on Credit Card or Debit Cards
Standing Instruction on cards has been in the news lately.
Reserve Bank of India recently released a guideline restricting payment aggregators and merchants from saving customer card details on their servers.
What does this mean?
Well, it means subscription services that depend on credit or debit cards are bound to get disturbed.
Needless to say, payment aggregators like Cashfree Payments have found a way around through services like Token Vault.
But that’s beside the point.
Apart from these new issues, the standing Instruction method has its own flows. For instance:
- India has a significantly less number of credit card users. In fact, there were only 58 million active credit cards in India in August 2020. For comparison, the U.S has 1 billion.
- It is only available on a few debit card providers.
- The upper limit of mandate can vary from one card issuer to another.
- Cards have expiry dates so the mandate has to be refreshed timely.
- It can be very expensive in the case of a high-ticket mandate as charges are made in percentage.
- It is not applicable for sectors like NBFCs and Mutual Funds.
Of course, there are plus points to the Standing Instruction method as well.
- It is a real-time solution
- It is safe: payment is done through a 3D secure flow
- The authentication process is simple; the customer only needs the OTP and card information
Electronic Clearing House (ECS)
A lot of experts actually think that Electronic Clearing House (ECS) is actually a thing of the past.
And maybe for good reason?
- It is offline: the customer has to submit a physical form to the bank or organization
- Slow process: Mandate creation takes a whopping 30 days
- It is time taking: not suitable for businesses that offer monthly small-ticket subscriptions
- High failure rates
However, you’d be surprised to know that ECS is still used by many customers.
Especially for high-ticket mandates like loans, insurance and SIPs.
National Automated Clearing House or NACH
With NACH, customers can directly use net banking services to enable recurring billing. In fact, it was actually created to do away with the inefficiencies of ECS.
- It activates in a day. Unlike ECS that can take 21-30 days.
- It only requires the userID and password for creating the mandate
- No charges are levied in case of insufficiency of funds
- Lower regulatory issues
Now, NACH can be offline as well as online. The offline NACH has obvious drawbacks of paper-based mandates and high failure rates. Even though it is economical, the technical downfalls make it an unfavourable option.
Online NACH or e-mandate is a real-time service. However, it is not user-friendly. Moreover, customers have reported several issues with registration and periodic debits time and again.
Even after these aforementioned options, there was a scope for improvement.
Then came, UPI Autopay.
UPI AutoPay feature is not only easier for businesses to implement but is also convenient for users.
Using any UPI App, a user can create, approve, modify, pause or revoke auto-debit mandates anytime.
The UPI AutoPay feature also gives the user access to their past mandates for their reference and records.
Most importantly, it is very easy to create a mandate on UPI Autopay. It is instant and only requires the UPI PIN for authentication.
Let’s discuss this in detail.
How Do UPI Payments Work?
Now, the next question that pops up is “how to enable UPI autopay?”
Like we mentioned before, you can just follow three easy steps to enable UPI autopay payments on Cashfree Payments.
- Create a plan via Dashboard or APIs
- Add subscribers and notify them
- Authenticate and start accepting payments!
However, what happens in the background?
How does the UPI Autopay mechanism enable recurring payments?
Let’s find out.
User Downloads and Registers on UPI App
The first step is when a user downloads a UPI app.
They register the phone number that is registered with their bank.
The UPI-enabled apps (like Google pay and Phonepe) use the UPI SDK to register the device fingerprint. You can consider this UPI SDK as teh central repository used by all apps. This fingerprint later works as an authentication factor.
User sets UPI VPA
The customer sets their unique Virtual Payment Address or VPA in UPI. Consider this as an email id for the customer’s bank account.
Thereafter, the user connects the UPI ID to their bank account. The Issuing bank sends an SMS to connect them both.
Now, every UPI enabled app ties up with an acquiring bank for these UPI payments.
The UPI app makes an API request to create the UPI ID chosen by the customer. The phone number is connected to the UPI ID as well.
Creating the UPI PIN
The user maps their UPI ID to a bank account. For this, the UPI-enabled app has to make a setcredentials request to NPCI.
The user enters the card details and chooses a 4 to 6 digit UPI PIN.
This PIN becomes the second authentication factor after the fingerprint.
Meanwhile, the issuing bank confirms the bank validity and returns with the account information. Consequently, the acquiring bank updates its information. So, they map the new UPI ID to the bank account information it has received.
Customer Enables Mandates
Now, you as a merchant has to initiate the mandate.
The recurring payment will be automatically debited once the customer accepts the mandate.
Here are the parameters that a UPI Autopay mandate requires:
- Start and End Date
- Amount of Mandate: Now, the customer can have fixed billing, dynamic billing or hybrid billing. (more on this later!)
- Frequency of debit: The amount may be debited weekly, monthly or yearly or whenever presented
Merchant/Aggregator Sends a Debit Notification
Here’s something interesting about Autopay debits.
The merchant has to send the UPI debit notification 24 hours before the debit to the customer.
This provides higher control to the customer. They can choose to cancel the debit transaction in time.
For the first transaction, the customer has to enter the mPIN. However, this rule doesn’t hold true if the debit is happening within a minute of setting the mandate.
Amount Debited from User’s Account
Now, this just might be the most important step of all.
Let’s consider your customer’s name as Sam. They use Phonepe to do UPI payments from their account in HDFC bank.
Now, let’s say that Phone Pe’s Acquiring Bank is ICICI.
Next, let’s assume your company is titled XYZ and your Issuing bank is SBI.
Let’s say your UPI app’s Acquiring Bank is Axis Bank. So, your VPA is xyz@axis.
Now, how will the debited amount reach you?
- Sam (sam@icici) will scan your QR code, enter your registered mobile number or UPI ID. Phonepe will invoke a method from the official UPI SDK to configure the device fingerprint.
- Phonepe app will verify fingerprints with their servers. Thereafter, they will send back Sam’s bank account and IFSC code.
- Phonepe will send data to NPCI via their Acquirer, ICICI bank.
- NPCI will check your (the receiver’s) VPA (xyz@axis) and map it to Axis bank. The bank will confirm the validity of the UPI ID and linked bank account. It will also forward your bank a/c number and IFSC to NPCI.
- Now, NPCI will direct HDFC to check Sam’s fun availability. It will cross-check fingerprint and PIN as well.
- On successful verification, HDFC debits the amount and sends a response to NPCI.
- NPCI maps your UPI ID to your bank account in SBI. So, it will direct SBI to credit funds in your account. SBI will send success response to NPCI.
- NPCI will forward the response to GooglePay (via Axis Bank) and Phone Pe (via ICICI bank)
Using a Payment Aggregator For Accepting UPI Payments
However, there is one more issue we must address.
As a merchant, you will need to accept numerous payments, many of them through UPI. Needless to say, using a payment aggregator’s (PA) services becomes indispensable.
So, how will your UPI payment process go if a PA like Cashfree Payments in involved?
Well, here are the defining factors.
Here, the receiving UPI ID xyz@axis will be a bit nuanced. It will be owned by the payment aggregator. For instance, Cashfree Payments (cashfree@axis).
Ergo, it will not be associated with any app in particular.
It is also not used for debits. Hence, there is no ‘Issuing Bank’ as such.
The UPI IDs are created from the backend by the acquiring bank and mapped to an aggregator nodal account.
There are multiple merchant level UPI IDs mapped to the merchant’s nodal account.
Modifying UPI Autopay Mandate
Now, it’s possible that some parameters of the mandate need to be changed.
For instance, the mandate amount and end date can be easily modified.
However, if you or the customer needs to change any other parameter, you need to create a brand new mandate.
Cancelling or Pausing UPI Autopay Mandate
UPI does not disappoint here.
Both the customer and merchant can pause the UPI autopay transactions.
The customer can cancel the mandate through the UPI app. (Gpay, Phonepe etc)
The merchant can do it manually through the payment aggregator’s dashboard as well.
FAQs on UPI Autopay
What are the Limitations of UPI Autopay?
- Some experts believe that UPI autopay provides too much power to the user. The user can pause or cancel the UPI automatic payment. In cases of loan EMIs, mandate cancellation can lead to bounces. So, the merchant would need to seek remedy under the Negotiable Payment Instruments Act.
- SIPs are a huge use case for recurring payments. However, they require transactions through a registered bank account only. So, payment aggregators like Cashfree Payments have to build their own third-party validation feature.
What is the UPI Autopay Limit?
The UPI Autopay mandate limit is Rs. 5000.
If the mandate pricing exceeded Rs. 5000, then the customer has to enter the mPIN. Essentially, the transaction becomes a collect flow.
What is UPI AutoPay Collect Request?
There are two kinds of request in UPI Payments.
A Collect request allows a user to ask for funds from another party.
On the other hand, a ‘Pay’ request allows you to initiate the payment to another party.