National Payments Corp prepares on-device wallet to debut UPI Lite for small offline transactions

Representative image.

Two months after the Reserve Bank of India (RBI) floated a framework for facilitating small digital payments in offline mode, India's flagship payments processor has designed an on-device wallet for Unified Payments Interface (UPI) transactions up to Rs 200.

National Payments Corporation of India (NPCI) in a letter to banks said that UPI Lite will happen in two phases. The letter accessed by Moneycontrol read, "In phase one, UPI Lite will process transactions in near offline mode i.e. debit offline and credit online, and at a later point, will process transactions in complete offline mode i.e. debit and credit both offline."

UPI is a state-backed open platform that allows people to send money to each other and directly into bank accounts.

UPI Lite will initially launch as a pilot with multiple apps and banks. 

A balance of up to Rs 2,000 can be maintained in the wallet which can be reloaded only in the online mode through a two-factor authentication process, the letter said.

Further, the transactions can be executed without a UPI PIN as well. Customers using multiple UPI apps will be allowed to have multiple on-device balances. Users will receive consolidated debit SMS for financial transactions at regular intervals.

In another move to encourage UPI for low-value transactions, RBI Governor Shaktikanta Das earlier this month launched UPI 123Pay which will allow customers to make transactions through feature phones as well.

Currently, UPI clocks transactions worth over Rs 8.20 lakh crore every month and transactions below Rs 100 make up 75 percent of UPI's volumes. By giving access to more customers beyond the top cities and towns, NPCI is hoping to achieve a run rate of one billion transactions a day in three to five years.

UPI now enjoys a share of over 50 percent of retail transaction volumes in India, and continues to be the preferred mode of payment for low-value transactions. The limit for UPI transactions stands at Rs 2 lakh, up from Rs 1 lakh earlier.

For larger transactions, Indians prefer bank transfers through the National Electronic Funds Transfer (NEFT) or the Immediate Payment Service (IMPS).

What has added to UPI's rise besides the large scale shift towards digital payments during the pandemic is the fact that merchants are not charged any fee for accepting payments in this mode bringing UPI and RuPay debit cards transactions on par with cash transactions.