Mint Explainer: UPI Circle's vast potential beyond family and friends

Mint

03-05-2025

The newly introduced UPI Circle feature expands the reach of UPI to those without a bank account, such as minors, allowing inter-connected payments within trusted groups. The National Payments Corporation of India (
NPCI
) rolled out UPI Circle on its BHIM app a few months ago and opened it up for private payments platforms such as PhonePe and Google Pay last month. Mint gives a lowdown on UPI Circle and what it means for users.
This new feature allows users to create a 'circle' on a
UPI
platform and authorise payments on behalf of family, friends or other people. It also enables such people in the primary user's 'circle' to generate their own UPI ID even without a linked bank account.
A primary
UPI
user can add up to five dependent users to their 'circle', authorising them to transact from the primary user's UPI account within specified limits. The primary user will have real-time oversight of these transactions.
'UPI Circle enhances the way we share and manage our money and supports a more interconnected society," said Lalitha Nataraj, managing director and chief executive officer, NPCI BHIM Services Ltd, adding that the feature makes digital payments more useful, accessible and inclusive.
A UPI Circle transaction mainly involves three parties.
One is the primary user or UPI account holder who delegates the UPI authentication for another user to make payments. The secondary user is a person added to the primary user's UPI Circle so they can make UPI payments through the primary user's UPI-linked bank account. The third party is the recipient individual or merchant that initiates a payment with the secondary user and receives the payment from the account of the primary user.
Cash is still predominantly used for payments in India, especially for small value transactions. While UPI has enhanced the usability of and access to digital payments, it requires a user to link a bank account with their UPI ID to make transactions. UPI Circle addresses users who are still dependent on cash for their daily payment needs as they may not be managing money through their own bank account. According to NPCI, around 6% of UPI users make a large number of transactions because they also make transactions on behalf of other users.
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UPI Circle allows a primary user to authorize payments for secondary users from anywhere, while retaining control over the transactions. A primary user can choose 'full delegation' to allow secondary users to make payments themselves within a specified limit, or choose the 'partial delegation' option to authorise every UPI transaction initiated by a secondary user in real time. It offers a simplified use case for shared expenses and allows users to create 'payment circles', which streamlines day-to-day financial transactions. Currently, only partial delegation has been launched under UPI Circle whereas full delegation is in the works.
Without the need for an individual bank account, UPI Circle is seen opening up secure online payment solutions for those with limited access to digital financial services. It is seen extending the ease and convenience of digital payments to those who are underbanked and new to the ecosystem by enabling a secondary user to make transactions from a primary user's account with minimum intervention while ensuring risk mitigation.
The feature allows a primary user to review payment requests, track the expenses of a secondary user, get secure access to detailed payment records within each circle, and unlink access from their UPI Circle. Enhanced security protocols, seamless integration with UPI platforms, and clearly defined responsibilities and permissions for primary and secondary users are meant to ensure that transactions are secure and reliable.
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Banking technology company Zeta, in a post, said UPI Circle addresses a major gap in digital payments by providing the ability to delegate transactions securely and seamlessly—something that was only possible through cash till now.
Use cases of the new feature could include a parent providing expenses to their minor kids, authorising payments on behalf of older parents or senior family members who may be wary of digital payments, or individuals who may want to delegate household chores and expenses. It can also be used by business owners, especially small business owners, to delegate payments to staff, or for corporate expenses such as for fuel, tolls, or vendor payments.
UPI Circle opens avenues for financial platforms to increase volumes by capturing transactions that would otherwise be cash-based. It could also drive innovation as payments platforms look to develop new products and services tailored to delegated payment scenarios.
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