Soon, merchants may lose option to request 'collect' UPI payments

The National Payments Corporation of India (NPCI) is set to phase out ‘collect call’ transactions for merchant payments on the Unified Payments Interface (UPI) to curb online fraud, according to a report by The Economic Times. This move aims to reduce fraudulent transactions where merchants initiate payment requests from customers. 

 

Concurrently, banks are lobbying the government to reintroduce the Merchant Discount Rate (MDR) on UPI and RuPay debit card transactions. MDR, a fee charged to merchants for processing digital payments, was previously waived to promote digital adoption. Reinstating MDR could reshape the economics of digital payments in India, potentially impacting small businesses that rely on UPI for cost-free transactions.

 

 

Why are collect call transactions being phased out?

A ‘collect call’ transaction, also known as a pull payment, allows merchants to request payments from customers, who then approve the transaction via their UPI app. While this method was once common, it has become a target for fraudsters who exploit loopholes to deceive unsuspecting users.

 

Authorities are now favouring ‘push’ transactions, where customers initiate payments by scanning QR codes or using other secure methods. This shift is expected to enhance security, as it reduces the risk of fraudulent merchants pulling money from users’ accounts without proper verification.

 

Rising fraud in digital payments

The decision to phase out pull transactions comes amid growing concerns over digital payment fraud. Data from the Reserve Bank of India (RBI) shows that in the first six months of the financial year 2024-25 (FY25), 13,133 fraud cases were reported in card and digital banking, amounting to losses of ₹514 crore. In FY24, digital banking scams exceeded 29,000 cases, with fraudsters siphoning off ₹1,457 crore.

 

Fraudsters often exploit pull transactions by creating fake websites that offer non-existent products or services, tricking customers into approving fraudulent payment requests. Unlike major e-commerce platforms like Flipkart and Amazon, which are integrated with payment aggregators such as PhonePe and Paytm, many smaller or fake merchants continue to bypass know-your-customer (KYC) verification, making fraud easier to execute.

 

How will this impact UPI transactions?

UPI remains the dominant payment method in India, with 16 billion transactions recorded in February 2025 alone, 10 billion of which were merchant payments. In 2024, UPI transactions surged by nearly 46 per cent to a record 172.2 billion, up from 117.7 billion in 2023.

 

However, the use of collect call transactions for merchant payments has already declined significantly. Large online merchants and platforms have shifted towards direct UPI integrations via payment aggregators, making pull payments a less popular option. Industry estimates claim collect call transactions now account for less than 3 per cent of all merchant UPI payments.

 

For peer-to-peer (P2P) transactions, NPCI has already imposed restrictions, capping pull transactions at ₹2,000 per request. These transactions also account for less than 3 per cent of total P2P payments.

 

NPCI looks for alternative ways to verify merchants

While the transition away from collect payments is underway, NPCI is considering alternative verification mechanisms for large merchants to ensure they can continue to use all forms of UPI payments. Payment aggregators and banks may be required to verify merchant credentials, but the specifics of this verification process remain unclear.