UPI AutoPay woes hit India’s subscription market as businesses rely more on card payments
- Businesses and consumers are losing patience with UPI AutoPay, as failure rates of up to 90% trigger involuntary subscription cancellations, forcing startups and platforms to rethink their reliance on it for subscription growth.
India’s subscription economy is crawling back to cards for recurring payments, as businesses and customers grow weary of UPI’s AutoPay feature hitting failure rates of up to 90%.
August data from the National Payments Corporation of India (NPCI), which runs the Unified Payments Interface (UPI) for realtime bank transfers, indicate that 55-90% of automated payments across public and private banks on UPI AutoPay didn’t go through during the month.
The high failure rate was largely because of factors such as insufficient balances in bank accounts and incorrect beneficiary details, per NPCI’s data. But, according to industry experts, this has triggered involuntary cancellations of subscriptions, elevating churn for startups that rely on recurring payments.
Executives at software companies and video streaming platforms Mint spoke with said they are now also focusing on debit and credit cards and netbanking to facilitate recurring payments. But herein lies a conundrum—UPI remains the default choice in small towns because of its ease of use, and in price‑sensitive segments such as video-streaming, social media, and software subscriptions.
State Bank of India, which handled nearly 2.13 billion UPI AutoPay transactions in August, saw only 36.14% of those go through, NPCI data show. Airtel Payments Bank processed 568.9 million UPI AutoPay transactions but only 10.49% were approved.
Among large banks, ICICI Bank Ltd reported the highest approval rate for August—about 52%.
Chinmaya Desai, co-founder and chief business officer at Falcon FS, a banking–technology platform, said recurring payments on cards and netbanking usually fail for predictable reasons such as insufficient balance or a maxed‑out card limit. Those don’t usually depend on devices, mobile networks, or multiple intermediaries.
“With UPI AutoPay, you’re also depending on the device, the network, and the UPI rail itself has more moving parts, which means more ways to fail," he said.
NPCI classifies UPI AutoPay failures caused by issues such as insufficient bank account balance or invalid PIN details as ‘business declines’, and those caused by system or network issues as ‘technical declines’.
User behaviour also adds friction due to frequent switching of primary UPI apps or handles to chase various payment offers and discounts, which can disrupt mandates for recurring payments and trigger failures, Desai added.
- UPI AutoPay’s high failure rates—ranging from 55% to 90% across banks—are causing widespread disruptions in recurring payments, leading to subscription cancellations and customer churn.
- Businesses are reverting to cards and netbanking for recurring billing, valuing their relative reliability and predictability over UPI’s convenience.
- UPI AutoPay still dominates small-ticket, mass-market use in small towns and low-cost segments, but scaling it for dependable subscription revenue remains a major challenge due to its multiple technical dependencies.
A forced rethink
NPCI launched UPI AutoPay in 2020 to allow users to set up e‑mandates for recurring utility bill payments, subscriptions and mutual fund investments.
It was touted as a card‑free way to scale up small‑ticket subscriptions, and became more popular after the Reserve Bank of India in October 2021 tightened rules for card-based recurring payments by mandating additional authentication, pre‑debit notifications, and easy cancellation of subscriptions.
Besides, credit and debit cards are not as easily accessible as UPI, which works even on regular feature phones.
According to a PhonePe industry note citing research firm Statista, UPI AutoPay has helped accelerate digital adoption, with subscriptions gaining traction across video and audio streaming, gaming, health and fitness, and consumer software platforms.
But the high rejection rates are forcing an industry rethink.
A failure rate above 5% hurts businesses that depend on subscriptions as it drives up costs towards ‘re-acquiring’ a customer, adding workload for support and billing teams and resulting in direct revenue loss from involuntary churn.
The founder of a short-drama streaming app said the platform allows a week’s grace period for renewal of subscription. “If it still fails, the subscription is canceled and the user has to re‑authorize [the recurring payment]. But this creates a lot of friction. So we just assume that the user has ended the subscription voluntarily after this period," the founder said, declining to be identified as he didn’t want to be viewed as being critical of NPCI.
Phalgun Guduthur, founder of email management suite Simplehuman, is evaluating UPI alongside credit and debit cards for onboarding Indian customers.
But, “for subscriptions, I lean toward cards over UPI AutoPay because of reliability and merchant control for recurring charges", he said, adding that he has not historically viewed UPI as reliable for subscriptions. “That said, many customer segments prefer UPI, especially for monthly rather than yearly plans."
UPI’s mass factor
Online subscriptions in India tend to be of two kinds, explained Dharmesh BA, an independent user experience design consultant who has worked with consumer internet apps like CRED, Udaan, Plum Insurance, and Jar. While investment platforms like Groww or Jar position recurring payments as a service from day one, entertainment and streaming apps offer a ₹1 ‘trial’ for customers to set up an auto-pay mandate.
“In case of investment apps, users recognize the value they’re paying for upfront, but with entertainment apps, recurring payments are meant to move users from the free-trial tier to the paid tier," Dharmesh said. “With UPI AutoPay… users simply have the option to cancel the autopay as they like, and hence many users drop off after the trial… This is something consumer Internet apps may be struggling to fix."
To be sure, UPI AutoPay has continued to scale despite its high failure rates. UPI AutoPay transactions surged to about 175 million in January from about 58 million a year earlier, per NPCI’s latest available data for UPI AutoPay transactions. Currently, 333 banks offer UPI AutoPay to their customers.
According to Desai of Falcon FS, UPI AutoPay remains the most practical platform for subscriptions plans under ₹100 targeted at users in tier 2 and tier 3 cities as cards don’t cover the mass base sufficiently.
From a technology standpoint, he said it’s never been easier to build subscriptions in India with multiple platforms available, including e-NACH (Electronic National Automated Clearing House) and digital wallets.
“(But) the real challenge is scaling against the dependency and variability introduced by UPI’s device, network, and bank mapping, and the sheer scale of Indian usage, which shifts by geography and demographic preference," Desai said.
Correction: An earlier version incorrectly said the number of banks offering UPI AutoPay to their customers had increased to 647 in January from 550 a year earlier. That number refers to the total number of banks live on UPI, not UPI AutoPay.
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