Roles and Responsibilities of NPCI, PSP, and TPAP in UPI

byjitendra7.singhLast Updated: September 1, 2023
Roles and Responsibilities of NPCI, PSP, and TPAP in UPI

The successful operation of a Unified Payments Interface (UPI) is the direct result of roles and responsibilities discharged by its members, namely NPCI, PSP, and TPAP. The National Payments Corporation of India, or NPCI, is the owner and operator of UPI, which ensures the safe and efficient working of the UPI system. PSP (Payment Service Provider) ensures that the UPI app complies with all safety measures, while TPAP (Third Party Application Provider) works as a service provider and participant in UPI via PSP banks.

All these three major members play different roles in ensuring the seamless working of UPI in India. It is essential to comprehend the roles of each UPI member to gain a thorough understanding of the functioning of the UPI app. In this article, we are going to break down all the roles and responsibilities of NPCI, PSP, and TPAP in the smooth working of the UPI. But before getting insights into the roles and responsibilities of UPI members, let us first understand what UPI is.

What is UPI?

Unified Payments Interface (UPI) is a real-time payment system developed by NPCI with an aim to bring financial inclusivity to the Indian economy. UPI facilitates the online transfer of funds across different banks using a single mobile application.

The UPI payments are made using UPI ID, QR code, inter-bank transfer, or mobile number. Some major participants in UPI may include payer PSP, payee PSP, remitter bank, NPCI, beneficiary bank, bank account holders and merchants. Every participant in UPI, directly or indirectly, contributes to its smooth functioning across every payment gateway.

Roles and Responsibilities of NPCI in UPI

From operating UPI to routing online transactions, NPCI plays a huge role in shaping the UPI payment system in India. Here is what NPCI does:

  • NPCI owns and administers the Unified Payments Interface platform.
  • NPCI establishes UPI’s rules, guidelines, and regulations, defining the roles, responsibilities, and liabilities of Payment Service Providers, Third Party Application Providers, and other participants. This includes managing dispute resolution, transaction processing and settlement, and clearing cut-offs for appropriate settlement.
  • NPCI permits the participation of PSPs, customer banks, Prepaid Payment Instruments (PPIs), and TPAPs in the UPI ecosystem.
  • NPCI ensures the provision of a secure, efficient, and reliable UPI system and network.
  • NPCI offers online transaction processing, routing, and settlement services to all members involved in operating UPI.
  • NPCI has the authority to conduct audits on UPI participants, either directly or through third parties, and can request data, information, and records related to their involvement in UPI.
  • NPCI provides PSPs with system access, enabling them to download reports, initiate chargebacks, and update the status of UPI payments.

Roles and Responsibilities of PSP in UPI

Payment service providers in UPI are the intermediaries that provide payment services to users via the UPI platform. Here are the roles that PSPs play in UPI:

  • PSP is a banking platform. It connects to the UPI platform to offer UPI payment services to itself and TPAPs, enabling users and merchants to complete transactions.
  • PSP, either via its own or a TPAP’s app, registers and onboards users onto UPI. They link their funding accounts to their appropriate UPI IDs.
  • PSP is accountable for authenticating users during registration, whether through its own app or a TPAP app.
  • PSP connects with TPAPs to onboard them to make their devised UPI app available to extended users.
  • PSP is responsible for ensuring the adequate security of TPAPs and their systems for UPI operations.
  • PSP is responsible for auditing TPAPs’ UPI-compliant applications and systems to maintain the security and integrity of user data, including UPI transaction data and UPI app security.
  • PSP stores all payment data, including UPI transaction data, collected for facilitating UPI transactions within India.
  • PSP allows UPI customers to choose any bank account from the available list of customer banks on the UPI platform to link with their UPI ID.
  • PSPs establish a grievance redressal mechanism to address and resolve user complaints and disputes.

Roles and Responsibilities of TPAP in UPI

Third-Party Application Providers or TPAP are service providers like PSP but also participate in UPI transactions via PSP banks. They play a crucial role in UPI by carrying out the following responsibilities:

  • TPAP works as a service provider and participates in UPI via PSP bank.
  • TPAP must adhere to all PSP bank and NPCI requirements regarding its involvement in UPI.
  • TPAP is accountable for ensuring the end-to-end security of its systems to function effectively on the UPI platform.
  • TPAP must comply with all applicable laws, rules, guidelines, and regulations prescribed by statutory or regulatory authorities, including circulars and guidelines issued by NPCI, concerning UPI and TPAP’s participation.
  • TPAP is obligated to store all payment data, including UPI transaction data collected for UPI transactions, entirely within India.
  • TPAP is responsible for facilitating access to its data, information, and systems related to UPI by RBI, NPCI, and other agencies designated by RBI/NPCI for auditing purposes, as required.
  • TPAP shall provide end-user customers with the option to put up their grievances through its UPI app or website’s grievance redressal facility and other appropriate channels like email, IVR (Interactive Voice Response), messaging platforms, etc.

Conclusion: Unified Payment Interface is a success because of the endless efforts of the members of UPI working behind it. Integral members of UPI like NPCI, PSP, and TPAP ensure UPI’s safe and secure working across India. With all their roles and responsibilities discussed above, one can easily differentiate the roles NPCI, PSP, and TPAP play for the efficient working of UPI. PSP and TPAP in UPI also provide the end users with a grievance redressal facility to help the users facing any difficulty in navigating UPI. This comprehensive system guarantees users of UPI’s smooth functioning in the future.


What is NPCI’s role in UPI, and how does it govern the system?

NPCI, as the umbrella organization for retail payments in India, plays a central role in the UPI ecosystem. It developed and manages the UPI platform. NPCI sets the rules and regulations for UPI transactions, ensures interoperability among different banks and payment service providers, and monitors the system for security and compliance. NPCI also collaborates with banks and other stakeholders to enhance the UPI ecosystem’s efficiency and security.

What does a Payment Service Provider (PSP) do in the UPI framework?

A Payment Service Provider (PSP) acts as an intermediary between users and their respective banks. It provides the technology and infrastructure that enables users to initiate UPI transactions through various channels like mobile apps, websites, or POS machines. PSPs are authorized entities that must comply with NPCI’s guidelines and are responsible for ensuring seamless and secure UPI transactions for their customers. Some examples of PSPs are PhonePe, Google Pay, and Paytm.

What role do Third-Party Application Providers (TPAPs) play in the UPI ecosystem?

Third-Party Application Providers (TPAPs) are entities that develop and offer UPI-based applications to users. These applications could be mobile wallets, merchant apps, or any other platform that utilizes UPI for payments. TPAPs leverage the UPI infrastructure provided by NPCI and work with PSPs and banks to facilitate transactions. They are responsible for ensuring that their applications adhere to security standards and compliance guidelines set by NPCI.

How does NPCI ensure the security and reliability of UPI transactions?

NPCI follows stringent security measures to safeguard UPI transactions. It mandates two-factor authentication (2FA) for all UPI transactions, requiring users to enter a PIN or use biometric authentication to authorize payments. Additionally, NPCI collaborates with banks and PSPs to implement various security protocols, regularly conducts security audits, and monitors the system for any suspicious activities. The organization also encourages users to adopt best practices to protect their UPI credentials and report any fraudulent activities promptly.

What are the collaborative responsibilities among NPCI, PSPs, and TPAPs in the UPI ecosystem?

The collaboration between NPCI, PSPs, and TPAPs is crucial for the smooth functioning of the UPI ecosystem. NPCI sets the guidelines, standards, and rules for the entire system, ensuring uniformity and interoperability. PSPs and TPAPs adhere to these guidelines while providing innovative and user-friendly payment solutions. They work together to maintain a secure and reliable UPI ecosystem, promptly resolving any technical issues, and addressing customer concerns.

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