PhonePe launches UPI Lite for smaller payments, two months after Paytm

PhonePe's launch of UPI Lite comes on the heels of its massive potential $1 billion fundraise that it announced in January

PhonePe has launched UPI (Unified Payments Interface) Lite payments feature on its application to enable faster payments for smaller transactions, two months after its biggest competitor Paytm went live with the platform.

The new feature would allow users to initiate low-value payments under Rs 200 with a single tap from their UPI Lite account without entering a pin, the Walmart-backed payments decacorn said in a statement on May 3.

SoftBank-backed Paytm had gone live with UPI Lite in the last week of February.

Through UPI Lite, a transaction is processed directly by debiting the on-device UPI Lite balance without involving the customers’ banks’ (remitter bank) core banking systems in real-time, making transactions more seamless and even faster than the regular UPI transactions while also increasing the success probability of the transaction the company explained.

UPI Lite on PhonePe is supported by all major banks and is accepted by all UPI merchants and QRs across the country, the company said, without specifying which banks would be supporting it. According to reports, UPI Lite on Paytm was supported by nine banks including Canara Bank, Central Bank of India, HDFC Bank, Indian Bank, Kotak Mahindra Bank, Punjab National Bank, State Bank of India, Union Bank of India, and Utkarsh Small Finance Bank.

PhonePe said users can instantly activate the UPI feature on their PhonePe app through a simple process that does not involve any KYC (know your customer) authentication and also create a UPI Lite account. Moreover, users can load up to Rs 2,000 in their Lite account and make transactions of up to Rs 200 or less in one go, the company said.

To check the transaction history, users will receive a daily SMS containing the history of UPI Lite transactions carried out during the day from their bank. This also results in decluttering bank statements and passbooks with small-value transactions, as the transactions would only be visible in the Lite account and not in the bank statement, the company added.

“UPI Lite is a core part of the UPI stack offering, with a vision to enhance the users’ digital payments experience for frequent and low-ticket size spends. Small-ticket transactions make up a significant volume of the overall UPI payments, and UPI LITE will make them quicker and convenient, without putting a strain on the existing UPI infrastructure," said Rahul Chari, co-founder and chief technology officer, PhonePe.

"UPI Lite also paves the way to introduce use cases that need payment execution without network connectivity making it one of the most exciting launches from NPCI in recent times. This is a crucial step towards increasing the adoption of digital payments for users across India, further strengthening a cashless economy," he added.

PhonePe's launch of UPI Lite comes on the heels of its massive potential $1 billion fundraise that it announced in January. The company has raised $750 million already from a clutch of investors including GIC, Walmart, Tiger Global, TVS Capital, and Ribbit Capital among others. The payments startup, which became India's most-valued fintech company with the fundraise, is also gearing up to launch digital lending on its platform.

UPI Lite is fast gaining popularity among users, especially for smaller transactions. In April Paytm said that it reached a new milestone of 4.3 million users on UPI Lite, according to media reports. UPI, on the other hand, touched a new high of 8.9 billion transactions in April in volume terms.