Money shouldn’t become unprotected the moment it moves.
FromPay, then recover→ToProtect, then release
Conditions for release are agreed before any money moves, a regulated provider holds the payment, and it is released when the agreed evidence arrives. Protection itself becomes something a buyer can search for and a seller can offer.
Pay first and hope
Kavita’s order for the sealing-machine part comes to ₹18,500 illustrative. Normally she would pay in full to someone she has never dealt with, and hope. This time the checkout shows the terms. A regulated payment provider will hold the money. It will be released to Imran when the part has been delivered and Kavita has inspected it, within a set window. If the part never ships, it comes back to her.
She taps to confirm. On his side, Imran sees a committed payment: protected, not yet his, and real. He can buy the steel and start cutting. The terms that protect the buyer also help the seller begin.
Conditions agreed upfront
The usual sequence is pay, fulfil, dispute, recover. The protected sequence is commit, protect, fulfil, verify, release. What changes is when the conditions are set: before the money moves, not after something has gone wrong.
Different transactions need different conditions, so protection has to be programmable.
| The transaction | The money is released when |
|---|---|
| A product | Delivery is confirmed |
| A service | Each milestone is accepted |
| A project | In stages, as each stage is accepted |
| An inspected order | The goods pass inspection |
Protection becomes a signal
Protection is more than back-end plumbing. A buyer can look for it (Shift 1) and a seller can offer it. A seller who accepts protected payment is saying that they are comfortable being held to what they agreed. A buyer who asks for it is saying nothing about the seller, only about how this kind of transaction should work. Over time the willingness to transact under protection becomes part of a participant’s record (Shift 7).
Go deeper
Who can hold the money
India already regulates who may hold money between a buyer and a seller. Under the Reserve Bank of India’s 2025 directions, a payment aggregator keeps the money it collects for merchants in a separate escrow account with a scheduled commercial bank, and must run a mechanism for payment disputes. Customers’ chargeback rights are left unaffected[2]. So this shift does not need anyone to hold money outside the regulated system.
What it needs is for regulated providers to offer release conditions that match the transaction. The directions leave settlement timing to the contract between the aggregator and the merchant, provided the timelines are stated transparently, and they do not themselves require release to follow delivery[2]. Conditional release is therefore a product a provider would have to choose to offer. Whether the transaction types above can be offered across aggregators is the first question for the pilot to settle with regulated providers.
What has already been proposed, and what already runs
ONDC’s 2022 consultation paper proposed that money collected from the buyer be paid out only on system-generated triggers, with settlement terms that can include milestone windows, such as delivery or the end of the return period, and amounts held back. It also proposed that downstream settlements happen within 24 hours of the trigger[1]. The network’s reconciliation and settlement framework now moves money between buyer apps, seller apps and banks through a settlement agency[3]. Whether the live protocol can carry delivery-linked or milestone-linked conditions is the other thing the pilot would confirm first.
A second route: block, don’t move
Another route leaves the money in the buyer’s account and blocks it. In December 2022 the Reserve Bank announced a single-block, multiple-debit facility for UPI, with hotel bookings, securities purchases and e-commerce among its intended uses[4]. Payment providers now offer it to merchants under names such as UPI Reserve Pay, with instalments and subscriptions as the uses they describe[5]. It could suit transactions where holding the money in escrow is more than the situation needs. Whether it fits delivery-linked or milestone release has not been tested.
The mechanism is not new
On China’s Taobao, buyers paid Alipay rather than the seller, and the seller could not draw the money until the buyer had received, inspected and acknowledged satisfactory delivery[6]. The mechanism is not new. What would be new here is running it across independent apps, where nobody owns the whole flow.
Getting it right
Regulated providers hold the money. Nobody on the network holds it outside the regulated system.
Fast release. Once the agreed evidence arrives, a seller shouldn’t wait longer than the process needs.
Proportionate. A small order gets light protection and a large one gets more.
Clear at checkout. Both sides see the terms before any money moves.
What could go wrong
- A cash-flow squeeze for small sellers.Holding payment until delivery delays money that a small workshop needs to buy material. Staged releases or short windows may be needed.
- Regulatory fit.Conditional release across aggregators and apps has to sit inside RBI’s payment rules.
- Friction at checkout.More terms to read can mean fewer completed orders.
- Release on weak evidence.If release can be triggered by a self-reported delivery, protection is only as good as the evidence behind it (Shift 3).
How we’d test it
One category of small-seller custom orders on one network, with release on verified delivery. Thresholds are set with participating sellers before launch.
Small sellers decline protected terms, or the wait for release is longer than they can carry.
| The test | What we would measure | What would end the idea |
|---|---|---|
| Protected terms on custom orders | Order completion, disputes opened, time from dispatch to release, and how many sellers accept protected terms when offered | Sellers decline protected terms in large numbers, or stop offering them once they see how long release takes |
| Seller cash flow | Days from dispatch to money received, compared with current terms | The median wait grows beyond what participating sellers said they could carry |
Sources
- [1]ONDC, Building Trust in the ONDC Network: Consultation Paper (29 September 2022)Checked; proposals for comment, not adopted policy
- [2]Reserve Bank of India, Regulation of Payment Aggregators Directions, 2025 (15 September 2025), paragraphs 8, 16 and 18 and Table 1Checked
- [3]Protean, ONDC’s Reconciliation and Settlement Framework (2 April 2025)Checked
- [4]Moneylife, Explainer: UPI’s single-block and multiple-debits feature (9 December 2022)Checked
- [5]Cashfree, UPI Reserve Pay documentationChecked
- [6]LIRNEasia, How China’s Taobao addresses trust problems (2014)Checked
Spotted a source we missed or a rule we misread? Tell us what we got wrong.
Protection tells the network what to do with the money. Evidence tells it when.