What is UPI Mandate?
A “Mandate” in the payments world is an official document which a bank account holder uses to instruct/authorize his bank to debit his account and credit a specific account in any bank. The mandate document contains the account to be debited, the amount to be debited, the account to be credited, and the bank in which the credit account resides. Naturally, the holder of the debit account signs this mandate to authorize the debit. If the document is a paper instrument physically signed by the account holder, it is called a paper mandate. EMandates is the name given if the same details are digitally authorized by the account holder. The account holder can authorize the mandate by using his net banking or card authentication mechanisms.
Paper mandates, eMandates are instruments facilitated under the NACH facility. Unified Payments Interface or UPI, another payment facility, operates small value instant transfers in India. The specialty of UPI payment is that the account details of the recipient are kept a secret and only a unique virtual ID that represents the account is used for the transfer. Besides UPI payments are instant. UPI payments are largely one-time payments initiated and authorized by the payer each time.
National Payments Corporation of India (NPCI) has launched UPI Mandates under its UPI 2.0 initiative. UPI Mandate, like NACH mandate, is the means by which the payer can instruct/authorize his bank to debit his account multiple times and credit the recipient account with any bank in the country.
Why do we need UPI Mandates when NACH mandates are already there? Well, UPI is meant for two main purposes, (1) to maintain the secrecy of the recipient’s account and two (2) instant non-revocable transfer of small value payments from payer to recipient. UPI Mandate is an extension of these two purposes for recurring payments. We all have many different payments to be made each month. Electricity bills, mobile bills, entertainment subscriptions, multiple digital content subscriptions such as magazines, Educational courses, etc. All of these are low-value, recurring payments and we sure will be relieved if we don’t have to bother about keeping track of their due dates every month. UPI Mandates is the solution to this requirement.
Imagine this. You receive a QR Code on your electricity bill. You scan the QR Code and set up a UPI Mandate (instead of initiating a UPI payment). In the UPI mandate, you fill in the day of the month and payment amount as “Variable” which indicates the bill amount each month. You then authorize the mandate by entering the UPI PIN. Now you have authorized your bank to pay the electricity bill each month on a specific date. All you need to do is to keep your account sufficiently funded so that the payment happens without a glitch.
Evolvus Solutions can enable Utility companies to extend UPI mandate links to consumers. Consumers can click on the link, follow the UPI mandate setup process, authorize the mandate by entering their UPI PIN. Paycorp.io will do the rest about setting up the mandate and managing the payment for the corporate.
Balaji is the co-founder and Chief Executive Officer of Evolvus Solutions Pvt Ltd. He plays a critical role in anchoring strategic priorities for the company to gain leadership position in the payments domain.