UPI mapper rule to promote interoperability triggers slugfest among payment apps, chaos for consumers

NPCI’s attempt to level the playing field, however, soon sparked confusion among users and friction among apps - forcing the payments body to step back and broker a fragile truce.

How does the UPI mapper work?

If Person A wants to send money to Person B using their mobile number, earlier NPCI allowed UPI apps to search locally to check whether Person B has a UPI address within the same app.

For instance, if both Person A and Person B are Google Pay users and if the former wants to send money to the latter using mobile number, Google Pay could search its internal database and map them for a seamless money transfer.

However, NPCI stopped the local UPI mapping and asked every TPAP to ping NPCI’s UPI mapper to identify the receiver.

“The idea here was that if PhonePe, Google Pay and Paytm were allowed to search locally, this would help entrench their dominating influence in UPI. This reduces the TPAP interoperability, a few new UPI apps argued to NPCI,” said a senior executive with one of the UPI apps.

Every time, when two users were transacting using their mobile numbers as an identifier, the new rule resulted in multiple hoops and pings to NPCI servers, creating latency and payment failures. While this in itself was not a big issue, it was not helping anybody in the ecosystem.

NPCI, Google Pay and PhonePe did not respond to Moneycontrol's request for comments for the story. Several founders of smaller UPI apps also refused to officially comment on this issue.

Dark patterns emerge

However, this rule triggered a race among UPI apps to ask customers to make them their primary UPI app to receive money. TPAPs started gaming the system, creating chaos in the ecosystem and confusing the customers.

This was done by reminding customers to make the app their primary app to receive money through multiple notifications and through a display message on the homescreen.

Many customers, unwittingly, approved the request, thinking that they could receive money through UPI only if they approved the request.

“Most smaller UPI apps felt that if customers receive money through their app, the likelihood of customers using the app increases, thereby increasing mindshare and recall value. This could also help them slowly become the primary app for sending money as well,” said another top executive with a UPI app.

And apps started doing this multiple times a day. Once a customer moved their primary app to another TPAP, other apps started sending notifications asking them to change back, confusing the customers.

Chaos ensued

UPI has users from all strata and segments of society, and not everyone understood what was happening.

Many customers were expecting to receive/view transactions in their primary UPI, only to be disappointed.

“Most people don't see SMS. Nor does it occur to them to check the bank statement. For a large majority of UPI users, the TPAP apps are their primary method to check transactions and account balances. Suddenly, they were unable to view the credit transactions when they started using a new UPI app. They were scared, and we saw thousands of complaints and escalations from customers telling us that they did not receive the money,” said the executive first quoted in the story.

The result was that many of these customers ended up distrusting the UPI platform and the apps.

In the end, NPCI blinked. The one-upmanship by the apps forced NPCI to reverse its order to facilitate a détente among the UPI players.

The duopoly and the recent rise of smaller UPI apps

One of the reasons behind the introduction of the centralised UPI mapper was that PhonePe and Google Pay continue to process 80 percent of all UPI transactions and NPCI wanted to reduce the market share of the top two apps.

NPCI circular on market cap suggests that no single TPAP should have more than 30 percent market share in the ecosystem. The rule has been kept in abeyance as there is no clear idea to implement the rule without inconveniencing customers, who chose their preferred app in a free market with close to 40 players.

Meanwhile, newer entrants over the last three years have been requesting NPCI to devise rules that could help them challenge the incumbents better. Navi, super.money and Bhim have risen through the ranks, taking market share from the top two players, though not a sizeable impact.

NPCI believed that the UPI mapper could turn out to be a feature that could provide a level playing field to newer apps.

What the new circular says

The new circular says that UPI apps should not be sending messages, notifications or nudges to customers to change their primary UPI app. Instead, the option should be available only within the customer’s account profile within each UPI app.

“Other than power users, not many will ever visit their profile settings. Technically, this gives the control back to customers, but practically, this feature makes no difference now after the new circular, other than introducing latency. This defeats the whole purpose of introducing a centralised UPI mapper,” said one of the executives at a bank that works with multiple UPI apps.

“UPI is a consumer product. NPCI tried to bring a bureaucratic solution. This is a classic case of a feature brought with good intentions going wrong,” said one of the executives quoted above.