In a recent development, Rahul Chari, the co-founder and CTO and PhonePe co-founder, expressed concerns regarding the adoption of a groundbreaking innovation within the Unified Payments Interface (UPI) framework. Chari outlined his thoughts in a blog post last month, highlighting potential challenges associated with the implementation of the new UPI Plugin, also referred to as a merchant SDK (software development kit). This innovative product empowers online merchants by allowing them to integrate a virtual payment address, facilitating the collection of funds directly without the necessity of a separate payments application. This streamlined approach aims to enhance the efficiency of transactions, enabling quicker and more seamless payments for customers, without the need for them to engage with third-party apps. 

To illustrate, consider a scenario where a customer is utilizing the Swiggy application to place an order and selects the UPI payment option. In this process, the customer is directed to a UPI-enabled application like Google Pay or PhonePe, facilitated by a notification prompt. After successfully completing the payment through the UPI app, the customer is then redirected back to the Swiggy platform to finalize the order. Nevertheless, this supplementary step in the payment journey has been found to contribute to instances of payment failures. These failures can be attributed to various factors, which may disrupt the smooth flow of the transaction. Addressing these challenges becomes imperative to ensure a seamless and hassle-free payment experience for customers engaging with online platforms like this.

The introduction of the UPI Plugin signifies a significant shift in the payment process, as it enables transactions to occur directly within the applications, eliminating the need for users to navigate to a dedicated UPI app. Notably, leading payment gateway and processing companies, including Paytm, Razorpay, and Juspay, have taken the initiative to offer their merchants the capability to integrate this SDK (software development kit). The incorporation of the UPI Plugin holds the promise of enhancing transaction success rates by as much as 15 percent. By providing merchants with the option to integrate this innovative SDK, these payment solution providers are striving to streamline the payment experience for customers.

“The UPI Plugin model does not offer any significant technical benefit to improve success rates. It instead shifts the onus that exists on payment apps today to the sponsor bank and the merchant application. This model introduces more complexity and puts more burden on the merchants rather than helping them focus on their core business." - Chari

Source: Money Control