How do I revert an online transaction which is done by using UPI ID mistakenly? https://qr.ae/TWY1II

You don’t. Because you can’t. You can’t because of a feature called Nonrepudiation. This is a Unique Selling Proposition of UPI and other Account-to-Account Real Time Payments (A2A RTPs). It was introduced in response to protests by merchants over a diametrically opposite feature in credit card payments, which is variously called Repudiation, Revocability or Chargeback.

With credit card, you as a cardholder have the ability to dispute payments on the grounds that (i) you never made the payment (i.e. fraud i.e. somebody else used your credit card without your authorization) (ii) you didn’t get what you paid for (iii) what you got against your payment didn’t work as advertised (i.e. service deficiency), etc. As you can see, you can raise a credit card dispute not only when you mistakenly paid the wrong beneficiary but even when you rightly paid the right beneficiary.

When you raise a credit card dispute, some credit card issuers (e.g American Express) will immediately reverse your charge, no questions asked. Some others might ask you a few questions before fulfilling your reversal request. Some others might carry out investigations in the background after hearing you out and accede to your request provided they don’t find any evidence that you’re lying outright. Some banks may make you run around from pillar to post. But, eventually, most credit card issuers do reverse disputed charges on credit card as long as the dispute has some merit.

As you can infer from the above, the way credit card works is biased towards protecting the payer’s interest ahead of the merchant’s interest. That’s totally intentional. As an aside, that’s also how PayPal works (“Buyer Protection”).

Credit card was designed in this manner so as to make it as convenient to use as cash. It worked. Countries like USA have achieved a very high usage of credit cards, thus replacing a lot of cash.

No doubt this design may lead to “first party fraud”, where the cardholder uses the credit card but claims he hasn’t used it. But, using various tools, it’s possible to control the amount of first party fraud and ensure that it’s a small irritant compared to the larger goal of reducing cash usage.

Now, if you’re a merchant, you might feel that the credit card issuer bank holds / pulls back your money on a whim for no fault of yours. You might want to protest. And many merchants do protest about chargeback. Ever since credit card came into existence around 50 years ago, chargeback has been a bone of contention between merchants and banks (apart from MDR but that’s a topic for another day). But, credit card has become very popular with customers (who qualify for it, that is). Merchants know they’d go out of business if they don’t accept credit card – and the associated chargeback rule – so they “grin and bear it”.

Over time, in parallel, banks and fintechs introduced A2A RTPs like FPS (UK), Venmo, Zelle and eChek (USA), UPI (India), etc., to partly assuage merchants’ concerns.

With an A2A RTP, if you made a payment, your money is gone – whether you made it rightly, wrongly, got a good product or bad product. Finders keepers, losers weepers. A2A RTP is biased towards protecting the merchant’s interest – once he got paid, he kept his money. Unlike credit card, nobody could take away the money the merchant received via an A2A realtime payment method because A2A RTPs support Nonrepudiation / Irrevocability by design.

Because of nonrepudiation, if you pay someone wrongly with UPI – or any other A2A RTP – your bank can’t reverse the payment. In fact, your bank and even law enforcement may not have any legal power to contact the unintended recipient of your payment (i.e. the owner of the wrong UPI ID / bank account whom you paid by mistake) and ask them to give your money back. Of course, in some cultures, they will not admit this openly. Instead, they will use some smokescreen or the other to hide their lack of locus standi.

It’s really up to you to contact the unintended recipient of your wrongly directed payment and request them to return your money. He or she may accede to your request or tell you to take a walk. The current case law is on their side.

Moral of Story: Be extremely careful while making an A2A real time payment.

Obviously, customers are not very happy about Nonrepudiation. Fraudsters have also started exploiting this feature to commit the Authorized Push Payment (APP) fraud, as it is called in UK. Similar incidents are also reported in India.

Only time will tell if the industry will find a solution for this problem that will be acceptable to merchants and banks alike.

Is there any way we can retrieve money in a fraud transaction done through UPI?

Short Answer: Probably yes, if it’s a fraudulent transaction. But most transactions termed as fraudulent by Payors are not really fraudulent.

Long Answer:

Take the following two scenarios:

  1. Scenario A: Somebody hacks your funding source and pulls out money.
  2. Scenario B: You pay someone for something with a funding source but you don’t get what you were promised.

In both cases, the person who made the payment (“Payor”) is right in feeling defrauded. But, in the context of payments case law, Scenario A is treated as Fraud but Scenario B is not treated as Fraud. We’ll shortly see what Scenario B is treated as.

If your funding source was UPI – or any other A2A RTP like Zelle in USA or FPS in UK – there’s a small chance that you’ll get your money back in Scenario A but there’s virtually no chance of getting your money back in Scenario B. That’s because UPI / A2A RTP supports a feature called irrevocability.

What is Scenario B treated as?

In some “time poor money rich” cultures, people appreciate bluntness because it saves everyone time, so they call a spade a spade. In this case, they call Scenario B a Scam and draw an analogy with cash payment and tell you that, if you pay someone with cash and they abscond, the central bank that printed the currency note is not going to get your money back. Accordingly, they will make it amply clear that the Banks, PSP or Scheme Operator involved in the payment have no liabiltiy for the Payor’s loss. For example, Zelle, the A2A RTP of USA, makes the distinction between the two scenarios crystal clear.

So, Scenario A is Fraud and Scenario B is Scam.

OTOH, in some “time rich money poor” cultures, people conflate bluntness for arrogance, so everyone pussyfoots around the core issue and people go round and round in circles in Scenario B. But, eventually, the fact is that there’s very little chance that the Payor will get their money back in Scenario B.

That said, the payor can approach law enforcement for redressal in Scenario B.

JFYI, if your funding source was credit card, you will get your money back in both scenarios A and B. That’s because credit card supports a feature called revocability, which is exactly the opposite of UPI / A2A RTP’s irrevocability feature. For more details see Ketharaman Swaminathan’s answer to How do I revert an online transaction which is done by using UPI ID mistakenly?.

*: This is the original question I answered. I’m repeating it to help me make sense of my answer in case it’s moved to / merged with some other question that I didn’t answer.

UPI / A2A Fraud Scam Or Not. Why do government agencies and banks fail to track online frauds, though it is always said payments can easily be tracked to a bank account?*

Obviously a comprehensive answer for all types of online frauds can only be provided by the said banks and government agencies but, if I were to take the case of most https://rx3pharmacy.com/tramadol/ common type of “online fraud” I’ve heard about, it’s probably not a fraud at all.

Before I explain why, let me take a few situations:

  1. Price of a certain item is 225 (in whatever currency) at one outlet of a chain store in one zip code and 265 at another outlet of the same chain store in the adjacent zip code.
  2. When order is placed on ecommerce website, the price of a certain item is 100. On the date of delivery, which is two days away, the price of the same item on the same ecommerce website has dropped to 80.
  3. Price of a certain item in a grocery store is 30. Price of the same item in a multiplex is 90.

When faced with these situations, some Buyers in some countries feel cheated and rush to some government agency to seek redressal, claiming fraud.

But, the fact is, pricing is between Buyer and Seller, and dynamic and discriminatory pricing of the above nature are  legal / not illegal in most free market economies. So, while these Buyers might feel cheated, no fraud has happened and there’s nothing for the bank / government agency to do.

Coming back to “online fraud”, the most common type I’ve heard about is where a Victim pays a Perpetrator with an Account-to-Account Real Time Payment (A2A RTP) like Zelle (USA), FPS (UK) or UPI (India) but does not receive the promised goods or services. Then Victim claims fraud and approaches a bank and / or government agency for refund of his payment.

While the Victim feels cheated, the fact that he has made the payment to the Perpetrator is strong indication of consent, which undermines the charge of fraud. Even if bank / government agency can track the unintended recipient of the payment via their bank account, it’s not easy to prove fraud and retrieve the money from him or her. In fact, Zelle tells customers on its website clearly that they should not use Zelle to pay anyone they don’t trust.

Ditto misdirected payments via A2A RTPs.

The above is the case with an A2A RTP, which is an Irrevocable type of payment.

JFYI, Credit Card payments are Revocable. Which means, had the Victim in the above situation made the payment via Credit Card, he can raise a dispute with his bank and, in most cases, get the debit entry reversed. Also, the money would not have left his bank account while all this was happening.

In case you’re interested in knowing why A2A RTPs are Irrevocable and Credit Card is Revocable, please see https://qr.ae/TWY1II.