January 16, 2025 · 11 mins read
Santosh Kumar
In the age of digital payment, the paradigm of payment transactions has been altered by UPI (Unified Payments Interface). UPI, launched by the National Payments Corporation of India (NPCI) in the year 2016, has achieved a phenomenal level of popularity primarily attributed to its ease of use, speed, and availability. One of the key components that eventually made UPI even more straightforward is the UPI mandate. In this article, we shall elucidate what the UPI mandate is, its working, and why it is one of the most significant enablers for digital transactions.
The meaning of UPI Mandate is a pre-authorised command from a customer for a bank or payment service provider that, if satisfied, enables automatic debit of a fixed sum of money from a customer bank on a regular basis. This payment system is applicable to repetitive payments such as subscriptions, loans, utility bills, insurance bill payments, etc. Following the configuration, no additional manual authentication by the user of the transaction interactions is required. Thus, it is a reliable choice for both the payer and the payee.
The principle of the UPI mandate provides some mechanisation of periodic payments, and once users are paid on time, they can control the money more effectively. For example, if you are a monthly subscription user of a streaming service, then you can take up a UPI mandate, and every month, this amount will be taken from your bank account automatically.
To understand the workings of the UPI mandate meaning, let's break down the process into simple steps:
Initiating the Mandate: When the user selects a service or product with a recurring payment, the user initiates the UPI mandate. Then, they need to enter the data of the desired payment (amount, regularity (weekly, monthly, etc.), and bank account from which the debits will be taken out).
Authentication: After introducing the payment information, the user is requested to verify the transaction using their UPI PIN. This ensures that the user has opted in to be able to tick boxes for automatic payment in the future.
Confirmation: Upon a user-authenticated mandate, the bank or payment provider verifies the creation of the UPI mandate. This confirmation ensures that the payment will be deducted as per the agreed schedule without the need for manual intervention.
Automatic Payment: After the mandate is set up, the amount will be automatically withdrawn from the user's bank account by the associated bank account at the designated frequency. This ensures that the user does not need to worry about missing payments.
Notifications: Generally, the user is given a forewarning before every transaction, which facilitates transparency and enables the user to keep records of the payments.
It is smooth and easy to use, so UPI mandates an effective solution to handle recurring payments.
There are two types of UPI mandates:
Fixed UPI Mandates: These are mandates, as the user commits to paying a yearly fee at agreed-upon (fixed) periods in advance. For example, a customer can configure a UPI mandate to bill a recurring monthly set amount for a gym membership or a subscription service.
Variable UPI Mandates: The payment amount may vary based on the service or product. For example, the amount may change depending on usage, such as in the case of utility bills, where the charges can vary each month based on consumption.
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The UPI mandate meaning goes beyond just automating payments. There are several advantages for both users and businesses:
Convenience: UPI-mandated provisions simplify the process of recurring bill payment by users by not requiring individual transaction authorizations. This means there can be no escape from an installment payment, and all subscriptions, loans, and other ongoing payments are secured for timely payment.
Time-saving: UPI mandates no longer require users to make an effort to make bill payments or for subscription renewals. Every aspect is automated so that the user need not intervene, instead focusing on other challenges.
Security: UPI requirements are very secure because they require user authentication through a UPI PIN. Thus, only the account holder can authorise and agree to automatic payment.
Budgeting and Financial Planning: UPI requires that charge and spending receipts from subscribers with more than one subscription/recurring payment be improved. When payments are to be made periodically by automatic debit, this provides good control for the budgeting fees that are being charged.
Business Efficiency: UPI mandates provide businesses and service providers with a secure and convenient payment method for accepting money from customers. As automatic payment debits are implemented repetitively, they can guarantee cash flow stability and reduce late payments.
No Hidden Fees: In contrast to conventional automatic payment techniques, mandated payments in UPI are generally free of additional charges for both users and merchants.
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Setting up a UPI mandate is straightforward. Follow the below steps to configure a UPI mandate for periodic payments.
Select the Service: Initially, specify the service or product for which you intend to create the UPI mandate. It may be a utility bill, subscription service payment, loan payment, or insurance premium.
Choose UPI as Payment Method: In the payment process, please choose UPI as your payment option. You will be required to provide your UPI ID (a phone number or an email ID associated with a bank account).
Enter Payment Details: Input the payment amount and the number of times per week, month, etc. However, with respect to fixed amounts, the value of the payment will always be the same, while with regard to variable payments, it may change based on usage.
Authenticate: You will be asked to confirm the command by entering the 6-digit UPI PIN. At this step, only you are permitted to make the payment.
Confirm the Mandate: Following authentication, the bank or payment processor will verify that the UPI mandate has been successfully completed. You will also receive a notification confirming the same.
Ongoing Payments: The automatic deduction of active payments from your bank account will occur according to the schedule agreed to.
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For firms, UPI compliance offers a fantastic opportunity to optimise payment collection processes. Businesses can also offer customers the ability to subscribe to automatically set up recurring payments for products or services. This has particular relevance for subscription businesses, insurance companies, and utilities.
[For example], an online streaming service can enable the customer to create a UPI mandate for the monthly subscription. In so doing, the service provider is guaranteed the prompt payment of bills, and users have access to uninterrupted service without having to make payments manually every month.
UPI needs at least some help with utility bills like electricity and water bills to avoid late charges and penalties. Automatic direct debit payments are made each month to ensure that bills are always paid on time.
Given the rise of digital content and subscription services, the frequency of membership/subscription/subscription mandates using UPI is relatively high. One of the most frequent situations is that a large percentage of users subscribe to multiple services, e.g., streaming services (Netflix, Amazon Prime, etc.), music services (Spotify, Apple Music), and others. Creating a UPI mandate for these services guarantees that no payment will ever be missed and that the services will continue functioning uninterrupted.
For example, a user can set up a UPI mandate for their monthly Netflix subscription. After it is set up, the payment will be automatically taken from the payer's bank account each month and does not require manual intervention.
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Despite the fact that UPI requirements are secured in general, users still have to be careful so as to protect their private information. The following steps can help guarantee that your UPI mandate is secure:
Enable Two-Factor Authentication: Switching on two-factor authentication (2FA) on your UPI account is recommended for enhanced security, permanently switching it on. That makes the financial transactions more secure.
Monitor Your Transactions: Periodically check your bank account and UPI transaction history to ensure that only authorised debits are being recorded.
Use Trusted Providers: (Only create UPI mandates for verified service providers and merchants.) Please check the service's validity before providing any UPI information.
Update UPI PIN: Periodically change your UPI PIN to prevent unauthorised access (e.g., to the account).
The need for UPI is of key importance for e-commerce in India since it guarantees a seamless automated payment service for subscription-based activities and the same. It facilitates businesses to decrease cart abandonment, increase cash flows by achieving timely payments, and increase customer retention through seamless and uninterrupted services. An additional is that it lowers the cost of online transactions of e-commerce platforms, which shows how online retail platforms can succeed and grow rapidly in a fiercely competitive digital market.
The effect of the UPI mandate has been profound in India, whereby digital payments and financial inclusion have been enhanced. Permanent transactions of consumers and entities have become more straightforward, decreasing the reliance on cash and the cash banking system. This has enhanced the reach of services, especially for remote communities. By supporting India's move to a cashless format, the mandate also supports small businesses in managing their payments and contributes to the development of the digital infrastructure in India.
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The implication of the UPI mandate is central to the Indian digital payment ecosystem because it offers a clean and secure way out of the nightmare of recurring payments. UPI mandates typically offer users a convenient way to monitor spending behaviour without going through an explicit payment authorisation process, e.g., from a utility bill, a subscription service, or a loan application. By automating payments, UPI mandates save time, reduce errors, and provide a reliable payment method for both individuals and businesses.
What is the role of UPI mandate in subscription-based services?
UPI-specified constraints are a major step towards functional subscription-based offerings such as digital streaming, magazines, fitness apps, etc. By automating the payment process, subscribers ensure continuous service provision, and service providers receive a stable income. Since confirming the UPI mandate is easy, there is no need to update subscriptions manually on a monthly or yearly basis.
Can UPI mandates be used for one-time payments?
No, UPI mandates are explicitly designed for recurring payments. They are unsuitable for isolated transactions, such as a single purchase. When you wish to pay only once, traditional UPI payment options, credit cards, or net banking are preferred.
Can I link multiple bank accounts to the same UPI mandate?
Typically, a UPI mandate can be associated with a maximum of one bank account. However, some apps or service providers allow users to choose among several accounts before sending the mandate. Still, the mandate is applied to the same account that provided the payment deductions.
What happens if a UPI mandate expires?
UPI policy requirements are generally applied for a limited period of time (e.g., 6 months, 1 year). Following this, the mandate has to be confirmed/renewed; otherwise, payment processes are suspended. You will usually be informed of the approach to an end-renewal of the mandate prior to the current mandate expiring.
Can UPI mandates be used for international services?
Nowadays, UPI registration demands are mainly applied to transactions between users located in India. [But] when UPI usage spreads to the rest of the world, UPI may be possible to use for continuous payments over international utilities, and that depends on whether the international carrier of the service offers UPI as a payment method.
How does a UPI mandate impact user experience (UX) for digital services?
For digital services, UPI mandates enhance user experience by eliminating the need to check and renew payment details constantly. At this level of automation, customer satisfaction is improved, and the user can use the service without worrying about payment. It also reduces the chance of service disruptions resulting from error, e.g., a failed payment.
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