How do I revert an online transaction which is done by using UPI ID mistakenly?*

You can’t.

Because of a feature called Nonrepudiation or Irrevocability, which is the USP of UPI and other A2A payment methods. This feature came about in response to an opposite feature in the Credit Card world, variously called Repudiation, Revocability and Chargeback.

With credit card, you as a cardholder have the ability to dispute payments i.e. you can request for reversal of payments made to wrong - or even right - beneficiaries on various grounds such as (1) you never made this payment (i.e. fraudulent use of your credit card) (2) you didn’t get what you paid for / what you got didn’t work as advertised (i.e. service deficiency), etc. Some credit card issuers (especially American Express) will reverse your charge, no questions asked. Some others might ask you a few questions before fulfilling your reversal request. Some others might carry out investigations in the background after hearing you out and accede to your request as long as they don’t find any evidence that you’re lying outright. Some banks do make you run around from pillar to post but, eventually, most of them do reverse disputed charges on credit card as long as the dispute has some merit.

As you can infer from the above, the way credit card works, it’s biased towards protecting the cardholder’s interest (than the merchant’s interest.). That’s a feature, not a bug. This is also how PayPal works (“Buyer Protection”).

Credit card was specifically designed in this manner so as to make it as convenient as cash. It worked. Countries like USA have achieved a very high usage of credit cards, thus replacing a lot of cash. This design will lead to “first party fraud”, where the cardholder claims he hasn’t used the card when he has. But, using tools, it’s possible to control the amount of first party fraud and ensure that it’s a small irritant compared to the larger picture of driving greater credit card use and reducing cash usage.

Now, if you’re a merchant, you might feel that your money is held back / pulled back by the issuer bank on a whim even when you’re not at fault. This is called chargeback. Ever since credit card came into existence around 50 years ago, chargeback has been a bone of contention between merchants and banks (apart from MDR but that’s a topic for another day). But, credit card has become very popular with customers (who qualify to get it, that is). Merchants know they’d go out of business if they don’t accept credit card, so they have been forced to “grin and bear it”.

Over time, to partly assuage merchant’s concern, banks and fintechs introduced account-to-account (A2A) payment method via products like FPS (UK), Venmo, Zelle and eChek (USA), UPI / IMPS / NEFT (India), etc.

With A2A, if you made a payment, your money is gone - whether you made it rightly, wrongly, got a good product or bad product. Finders keepers, losers weepers. A2A was biased towards protecting the merchant’s interest - once he got paid, he kept his money. Unlike credit card, nobody could take away the money the merchant received via an A2A payment method. This is called Nonrepudiation / Irrevocability. Nonrepudiation is a feature, not a bug, of A2A payment methods.

Because of nonrepudiation, if you pay wrongly with UPI - or any other A2A payment method - you can’t insist on your bank to reverse your transaction. In fact, your bank and law enforcement themselves have no legal locus standi to contact the unintended recipient of your payment (i.e. the owner of the wrong UPI ID whom you paid by mistake) and ask them to give your money back. Of course, they’re unlikely to say that openly, instead using smokescreens to hide the bitter truth.

It’s really up to you to contact that person and request them to return your money. They’re free to accede to your request or tell you to take a walk. The law is on their side.

Moral of Story: Be extremely careful while making an A2A payment.

Obviously, customers are not very happy about Nonrepudiation. Fraudsters have also started exploiting this feature to commit the Authorized Push Payment (APP) fraud, as it is called in UK. Similar incidents are also reported in India.

Only time will tell if there will be any solution to this problem that will be acceptable to merchants.

*: This is the original question I answered. I’m repeating it since some of my answers don’t make sense even to me when they’re moved to / merged with some other question that I didn’t answer.