NPCI To Phase Out Collect Call Transactions On UPI To Tackle Rising Digital Payment Fraud

The National Payments Corporation of India (NPCI) is set to phase out collect call transactions for merchant payments on the Unified Payments Interface (UPI) in an effort to curb rising online fraud. This decision aims to minimize fraudulent transactions where merchants request payments from customers, reducing the risk of unauthorized fund withdrawals.

What is a collect call transaction?

A collect call transaction, also known as a pull payment, allows merchants to initiate payment requests that customers approve via their UPI app. However, this method has increasingly been exploited by fraudsters creating fake websites or businesses to deceive users into approving fraudulent payments. To enhance security, NPCI is shifting focus towards push transactions, where customers initiate payments themselves by scanning QR codes or entering merchant details manually, which will reduce the risk of fraud.

Digital Payment Fraud in India Rises Sharply

Fraud in digital payments has become a major concern; data from the Reserve Bank of India (RBI) reveals a sharp increase in scam cases. A Business Standard report highlighted that in the first six months of FY25, 13,133 fraud cases were reported in card and digital banking, leading to Rs. 514 crore in losses. In FY24, digital banking scams exceeded 29,000 cases, with fraudsters siphoning off a staggering Rs. 1,457 crore.

Fraudsters often exploit pull transactions by tricking customers into authorizing payments for non-existent services or products. Unlike e-commerce giants like Flipkart and Amazon, which integrate with regulated payment aggregators such as PhonePe and Paytm, many smaller merchants still bypass know-your-customer (KYC) verification, making fraud easier to execute.

UPI Transactions See Big Changes as Collect Call Payments Decline

UPI continues to be the most widely used digital payment method in India, processing 16 billion transactions in February 2025 alone, with 10 billion of those being merchant payments. Over the past year, UPI transactions have surged by 46%, reaching 172.2 billion in 2024, up from 117.7 billion in 2023.

Despite this growth, collect call transactions-where merchants send payment requests to customers-are becoming less common. Large businesses and e-commerce platforms are shifting towards direct UPI integrations via payment service providers. Industry experts estimate that less than 3% of all merchant payments now involve collect call transactions.

Stricter Rules on P2P UPI Payments

For peer-to-peer (P2P) transactions, NPCI has already placed a ₹2,000 cap per request on pull transactions, making them less widely used. These transactions also make up less than 3% of total UPI payments, signaling a shift towards safer payment methods where users initiate the transfer themselves.

Banks Push to Bring Back Merchant Fees on UPI

With changes in UPI security, banks are now lobbying for the return of the Merchant Discount Rate (MDR) on UPI and RuPay debit card transactions. MDR, a small fee charged to businesses for processing digital payments, was previously removed to promote UPI adoption. If reintroduced, MDR could affect small businesses that currently enjoy zero-cost digital payments, potentially making UPI transactions more expensive for them.

NPCI Plans New Merchant Verification Measures

As collect call transactions become obsolete, NPCI is working on new ways to verify merchants to keep UPI payments secure. Payment service providers and banks may be required to conduct stricter background checks on businesses, but the exact details of these new rules are still being finalized.