UPI transactions will be disabled from February 1, 2025

The National Payments Corporation of India (NPCI) has announced a critical update for Unified Payments Interface (UPI) transactions. Effective February 1, 2025, UPI apps that generate transaction IDs containing special characters will face disruptions as these transactions will be declined by the central system. The move is aimed at improving system efficiency, standardizing transaction processes, and enhancing security across the UPI ecosystem.

Why the Change?

In an official circular dated January 9, 2025, NPCI emphasized the need for uniformity in UPI transaction ID formats. According to the circular:

“Considering the criticality of compliance to the specifications, it has been decided not to allow any special characters in UPI transaction IDs. Any transaction with an ID containing special characters shall be declined by the central system. This shall be effective from February 1, 2025.”

The decision follows a previous directive issued on March 28, 2024, where NPCI instructed payment service providers (PSPs) to adopt a standardized 35-digit alphanumeric format for transaction IDs. Despite significant progress in compliance, some payment ecosystem players continue to use special characters in transaction IDs, prompting NPCI to enforce stricter measures.

Impact on Consumers and Businesses

For UPI users, this directive means that transactions made through non-compliant apps will no longer be processed. Apps that fail to conform to the updated requirements will be unable to facilitate payments from February 1, 2025.

Mohan K, Founder of TechFini, explained the rationale behind the move:

UPI transactions containing special characters in their transaction IDs will be declined by the central system. Only transaction IDs that follow an alphanumeric format will be processed successfully. This move aims to enhance system efficiency, prevent potential security vulnerabilities, and ensure uniformity across UPI transactions.”

Alok Singh, Executive Vice President at Ongo (AGS Transact), highlighted the compliance status:

“Most major payment ecosystem players have already complied with the NPCI directive regarding 35-digit alphanumeric transaction IDs. However, some PSPs remain non-compliant. Consumers using these non-compliant apps will face transaction failures post-February 1, 2025.”

Rahul Jain, CFO at NTT DATA Payment Services India, emphasized NPCI’s ample notice period:

“The NPCI has provided sufficient time for industry players to transition and adhere to UPI technical criteria. Transactions with special characters will be rejected after the deadline. Given the current state of preparedness, most players have already ensured compliance to avoid disruptions.”

Additional NPCI Guidelines

  1. Transaction ID Length:
    • All UPI transaction IDs must be exactly 35 characters long and consist only of alphanumeric characters.
    • NPCI mandates validation at the central system level to reject any transaction IDs not meeting these specifications.
  2. Duplicate Transaction IDs:
    • Duplicate transaction IDs have caused settlement issues and customer dissatisfaction. NPCI has reinforced the validation process to prevent such occurrences.
    • In cases where duplicate IDs are processed by the central system, the liability will fall on the defaulting PSP.
  3. Transaction Monitoring:
    • If successful transactions are not present in the raw data files provided by PSPs, beneficiary banks must hold the funds in the beneficiary account.
    • Such cases should be reported to NPCI for resolution.

Benefits of Standardization

Standardizing UPI transaction IDs is expected to resolve current inefficiencies in tracing unique transactions. Alok Singh from Ongo explained:

“With so many UPI apps generating transaction IDs using their own systems, it becomes challenging to trace transactions. Customers often face difficulties when quoting transaction IDs during complaints. A standardized 35-digit transaction ID can help identify PSPs, remitters, dates of transactions, and other key details.”

Mohan K from TechFini added:

“By eliminating special characters, UPI can streamline processing, reduce errors, and improve interoperability among banks and payment service providers. Merchants, payment gateways, and financial institutions must ensure that all transaction IDs generated or processed within their systems conform to the alphanumeric requirement to prevent payment failures.”

Consumer Action Required

UPI users are advised to ensure that the payment apps they use are compliant with the NPCI directive. If an app continues to generate transaction IDs with special characters after February 1, 2025, transactions will be declined by the central system, leading to potential payment disruptions.

This move by NPCI underscores its commitment to standardizing payment processes and enhancing the reliability of digital transactions across India.