Credit Card Transaction on UPI

 

Image Credit: fonearena

Background

UPI, developed by the National Payments Corporation of India (NPCI) is a realtime payment system that facilitates interbank transactions through mobile phones. Earlier UPI transactions involved linking bank accounts but recent developments authorized by the Reserve Bank of India (RBI) in June 2022, have extended this functionality to include RuPay credit cards. This expansion aims to enhance convenience increase credit card usage and integrate credit facilities into the UPI ecosystem which is particularly relevant given the high transaction volumes with over six billion monthly transactions reported in 2022.

The process begins with the customer linking their RuPay credit card to a UPI enabled app such as BHIM, GPay or PhonePe. This linking is a one time process after which the customer can use the credit card for UPI payments, authenticated by a UPI PIN specific to the credit card. The following sections detail the process flow and entities involved.

Process Flow Diagram


Step by Step Process Flow

The process flow when a customer scans a QR code and selects the RuPay credit card as the payment mode via a UPI application can be broken down as follows:

Customer Initiation:

  • Customer opens their UPI app (e.g., Google Pay, Paytm) and scans the merchant's QR code, which contains the merchant's UPI ID.
  • The customer selects to pay with their linked RuPay credit card from the list of payment options within the app.
  • The customer enters the UPI PIN set for credit card transactions to authenticate the payment.

UPI App Interaction:

  • The UPI app, acting as the Payment Service Provider (PSP) app sends a payment request to NPCI. This request includes the payment amount, the merchant's UPI ID, and an indication that the payment is to be sourced from the customer's RuPay credit card account, linked via the issuer bank.

NPCI Routing and Authorization:

  • NPCI which manages both UPI and owns RuPay Network, routes the authorization request to the issuer bank (the bank that issued the customer's RuPay credit card). This routing is facilitated through RuPay's network, given the credit card's association with RuPay.
  • The issuer bank verifies the customer's credit limit and available balance. It also checks for any restrictions, such as prohibited categories (e.g., cash withdrawals, P2P payments, digital account openings) as outlined by NPCI. Reference: NPCI

Issuer Bank Authorization:

  • If the transaction is within the customer's credit limit and meets all criteria, the issuer bank authorizes the transaction.
  • The issuer bank communicates the authorization back to NPCI confirming the transaction can proceed.

Settlement Process:

  • Upon receiving authorization, NPCI facilitates the settlement by crediting the acquirer bank (the bank associated with the merchant) and debiting the issuer bank.
  • This settlement ensures the merchant receives the funds in real-time, aligning with UPI's instant payment feature.
  • The settlement process leverages NPCI infrastructure which integrates both UPI and RuPay allowing seamless interbank transactions.

Acquirer Bank and Merchant Update:

  • The acquirer bank, upon receiving the credited amount from NPCI, updates the merchant's account.
  • The merchant is notified about the successful transaction through their banking app or payment gateway interface.

Summary

Entities and their Role
  1. Customer - Initiates the payment by scanning QR code and selecting RuPay credit card.
  2. UPI App (PSP) - Facilitates customer interaction, sends payment request to NPCI.
  3. NPCI - Manages UPI system, routes authorization to issuer bank, settles transaction.
  4. RuPay - Card network for credit card, involved in authorization through NPCI.
  5. Issuer Bank - Issues RuPay credit card, authorizes transaction, updates customer account.
  6. Acquirer Bank - Receives payment from NPCI, credits merchant's account.
  7. Merchant - Receives payment, linked to acquirer bank via UPI ID.

Disclaimer:

  • The process flow diagrams included in this blog are original creations by the author, Neeraj Singh. Any reproduction or use of these diagrams requires prior permission from the author.
  • Mentions and images of NPCI, RuPau, GPay are the property of their respective organizations and have been sourced from Google search. All rights to these trademarks and logos belong to their respective organizations.
Location: Mumbai, Maharashtra, India

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