As rightly said by Dave Chapelle "Modern Problems requires modern solutions". The only good outcome of the COVID-19 pandemic was that the digital economy saw a global revolution. Preventive measures such as lockdowns, social distancing, etc., which limited the scope of human interactions (all of which were a result of the pandemic), led to most forms of trade and communication being shifted online thereby increasing an individual's dependence on such digital transactions. Each transaction involves a cost which is fulfilled in the form of digital payment. While this can be treated as a great leap forward, such a change is not devoid of certain inevitable issues.

Keeping in mind the growing issues with various digital payments, the Reserve Bank of India (RBI), introduced the Online Dispute Resolution (ODR) system for digital payment in its Statement on Developmental and Regulatory Policies through its notification dated August 06, 20201. The said system is applicable for authorized Payment System Operators2 and their Participating members3.

Objective Of ODR System For Digital Payments

The goal of the system is to provide a "transparent, rule-based, system-driven, user-driven, unbiased mechanism for resolving customer disputes and grievances, with zero or minimal manual intervention."4

In other words, the main objective of this system is to enable a dispute resolution system that is not only transparent and unbiased but also provides redressal for consumer grievance with minimal or zero human intervention.

Structure Of ODR System For Digital Payments

Under this system, a consumer will be provided multiple channels to file the dispute which may be web based or paper based complaint form, IVR, mobile application, SMS or directly in the branch offices. Further, the consumer will be required to give minimum important details relating to the dispute. After receiving the details, the complaint will be lodged subsequent to which the consumers will be allotted a unique reference number under ODR system so that they can track the status of dispute. The said dispute shall be resolved within one month; however, if the dispute is not resolved then the consumers can approach the respective banking ombudsman.

Further, the notification states that the banks, PSO's, & PSP's should provide access to the consumer to file their grievances through ODR system. This also extends to mobile payment systems, United Payment Interface (UPI) and third party app providers wherin they are required to provide an option in their app itself to file the complaint through ODR system.

What Kind Of Transactions Are Covered Under This System?

Although the RBI specified in its notification that the system, for the time being, is limited only to disputes and grievances arising out of failed digital transactions, including those which have not been fully completed due to reasons unrelated to the customers (technical issues) such as failure in communication links, non-availability of cash in an ATM, time-out of sessions, etc. Apart from these, the system also includes those transactions whereby the amount has not been credited to the beneficiary's account due to a lack of adequate information or delay in the initiation of a reversal transaction.5

However in order to avail the remedy under this system the complainant should prove the Bank or the Payment System Operators or Payment failed to comply with the provisions relating to the circular of RBI regarding Harmonisation of Turn Around Time and customer compensation for failed transactions .

The following are the transactions covered in the circular of RBI relating to Harmonisation of Turn Around Time and customer compensation for failed transactions6 :

Type of transactions

Turn-Around Time

Compensation Payable

ATM's (Customer's account debited but cash not dispensed)

T+5 days

Rs.100 per day for delay beyond turn around time

Card Transactions

a) Card to card transfer
Card account debited but the beneficiary card accounts not credited.

b) Point of Sale (PoS) (Card Present) including Cash at PoS
Account debited but confirmation not received at merchant location i.e., charge-slip not generated.

c) Card Not Present (CNP) (e-commerce)
Account debited but confirmation not received at the merchant's system.

T+1 day

T+5 days

T+5 days

Rs. 100 per day for delay beyond turn around time

Rs. 100 per day for delay beyond turn around time

Rs. 100 per day for delay beyond turn around time


Immediate Payment System (IMPS)

a) Account debited but the beneficiary account is not credited.

T+1 day

Rs. 100 per day for delay beyond turn around time


Unified Payments Interface (UPI)

a) Account debited but the beneficiary account is not credited (transfer of funds).

b) Account debited but transaction confirmation not received at the merchant location (payment to merchant)

T+1 day

T+5 days

Rs. 100 per day for delay beyond turn around time

Rs. 100 per day for delay beyond turn around time

Aadhaar Enabled Payment System (including Aadhaar Pay)


a) Account debited but

transaction confirmation

not received at merchant

location

b) Account debited but

beneficiary account not

credited.

T+5 days

T+ 5 day

Rs.100 for delay beyond turn around time.

Rs.100 for delay beyond turn around time.

Aadhaar Payment Bridge System (APBS)

a Delay in crediting beneficiary's account.

T+5 days

Rs.100 for delay beyond turn around time.

National Automated Clearing House (NACH)

a.Delay in crediting beneficiary's account or reversal of amount.

b. Account debited despite revocation of debit mandate with the bank by the customer.

T+1 day

T+1 day

Rs.100 for delay beyond turn around time.

Rs.100 for delay beyond turn around time.

Prepaid Payment Instruments (PPIs) - Cards / Wallets

a.Off-Us Transaction

The transaction will ride on UPI, card network, IMPS, etc., as the case may be

b. On-Us Transaction

Beneficiary's PPI not credited.

PPI debited but transaction confirmation not received at merchant location.

Rules applicable to the respective system

T+1 day

Rules applicable to the respective system

Rs.100 for delay beyond turn around time.

Conclusion

While the proposed ODR system seems to be a hopeful path for "boosting digital payments and enhancing the broader financial ecosystem", the issues that may arise out of it must not be overlooked:

Firstly, the links between the various modes of lodging complaints must be analyzed, improper communications between the modes and the PSOs may create distortions and thus lead to ambiguities, which may have severe consequences.

Secondly, in an attempt to protect data or private information related to a customer, if the RBI creates a design that is too intricate or intertwined, it may complicate the overall process not just for the PSOs and PSPs but also for the customers.

Finally, in the event that a unique reference code does not function due to some technicality, the customer would have to go through another round of complaint lodging in order to understand the status of his case. This back and forth process may lead to customers losing trust in such a mechanism, thereby forcing them to shy away from making such payments online.

These are only a few indicative issues; however, there may be many more. It is too early to judge the validity of such an ODR system. All one can do now is be hopeful that the RBI keeps such technical issues in mind while designing an appropriate system to compliment the positive attributes it serves and come up with an effective system for an online dispute resolution to successfully cater to the disputes and grievances of its customers.

Footnotes

2. Payment system operators include both banks and the companies which are involved in payment system

operation.

3. Participating members means Payment system participants

5. Harmonisation of Turn Around Time (TAT) and customer compensation for failed transactions using authorised Payment Systems, Sept 20, 2019. Refer https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11693&Mode=0. Note: All provisions, including those relating to TAT and compensation to customers mentioned in the above circular need to be adhered to while resolving disputes and grievances using the ODR system.

6. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11693&Mode=0

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.