NPCI Launches ‘UPI Circle’ for Delegated Payments, Enhancing Financial Inclusion and Security

The National Payments Corporation of India (NPCI) introduced “UPI Circle – Delegated Payments” for secondary users on August 13, 2024. This feature allows a principal UPI user to establish a partial or full delegation link with trusted secondary users through the UPI App. Within the parameters and procedures of security, the primary user can grant permission to a reliable secondary user to complete transactions.

The UPI Steering Committee meeting held on August 3, 2023, endorsed the introduction of “UPI Circle – Delegate Payments.” This latest UPI feature aims to enable financial inclusion for unbanked segments of the population, including minors, the elderly, and families with a single bank account holder.

In July, UPI transactions exceeded Rs. 20 lakh crore, showing a 35% year-over-year increase to Rs. 20.64 lakh crore. Third-party apps like PhonePe (48.38%), Google Pay (37%), and Paytm (7.82%) benefited the most from UPI adoption, handling 93% of all UPI transactions in July. CRED and the Axis Bank App have market shares of less than 1% each.

“This innovation will not only drive convenience but also enhance security by reducing the risk of fraud within trusted ecosystems. Additionally, UPI Circle can be leveraged to create micro-communities within gig economies or collaborative platforms, where members can easily settle payments or pool resources in real-time. The versatility of this feature holds the potential to significantly broaden the scope of UPI beyond individual transactions, enabling it to cater to more niche, group-based financial interactions,” said Ajay Rajan, Country Head – Government, Multinational & International Business, Transaction Banking & Knowledge Units, Yes Bank.

How to Set Up UPI Circle?

A maximum of five secondary users may be added by the primary user, who may grant them full or partial authority to perform transactions through the same account. A secondary user can only accept delegation from one principal user.

Full Delegation – The primary user authorizes a secondary user to initiate and complete UPI transactions as per defined spend limits.

Partial Delegation – Primary user authorizes the initiation of payment requests from secondary users, Primary user shall complete the UPI transaction with the UPI pin.

The primary user of UPI Circle must first open the UPI app and choose a secondary user by entering the secondary user’s UPI ID. Throughout this process, you can grant partial or complete delegation and specify a transaction limit for the secondary user.

An invitation to accept delegation is sent to the secondary user. Once approved, the user can start the transaction by choosing the app’s payment options.

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Is UPI Circle safe?

Yes, transaction records are visible to both primary and secondary users in their payments app. Through third-party apps like GPay, Paytm, PhonePe, and others, you can access the UPI Circle feature.

 The bank employs a two-factor authentication procedure on each delegation request to guarantee appropriate permission. To avoid unauthorized use of delegated transactions, primary users can set transaction limitations. In partial delegation, where transactions are not authorized, you can impose a ₹5,000 maximum transaction limit or a ₹15,000 maximum monthly restriction.

Conclusion

With the rise of digital transactions, there is also a rise in digital banking fraud. Digital banking fraud jumped 5-fold to Rs. 14.57 billion in 2023 compared to the previous year, according to RBI. Users should set transaction limits and enable real-time notifications for delegated transactions to decrease scams involving UPI-delegated payments.

Paying with UPI delegation payments could be a game-changer for millions of Indians, especially those living in rural areas. Many rural homes have limited access to banks, and typically one family member is responsible for handling money. An older parent with trouble using a smartphone can assign payment chores to a younger, tech-savvy family member using the UPI delegate payment feature.

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