India’s National Payments Corp to debut UPI Lite

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The National Payments Corporation of India (NPCI), the umbrella organisation for all retail payment systems, is reportedly planning to launch UPI Lite, which will boost the digital payments ecosystem in the country.

The noteworthy part is that UPI Lite would enable small value transactions in an offline mode. NPCI believes that the launch of UPI Lite will reduce the load on the core banking systems and will “offer the advantage of a superior user experience and an uncluttered bank statement for users.”

The launch of UPI Lite follows the launch of UPI for feature phone users in the country.

According to a report by the Business Line newspaper, the NPCI is readying for the pilot launch of UPI Lite in the next ten days. The service will be “near offline” but will require a smartphone, and the transactions will be debit offline and credit online to begin with.

After the pilot phase, UPI Lite will process all the transactions in complete offline mode, which means that debit transactions from the wallet will happen in the offline mode, while credits will be processed online, according to a circular issued to all member banks by the NPCI. The publication reviewed the circular for its report.

NPCI also told UPI member banks that a full-scale commercial launch with compliance timelines for onboarding for the issuers and app providers should be declared after a due level of comfort.

With UPI Lite, users will have the option to enable the on-device wallet on their UPI app of choice. Users can then allocate funds from their bank account to UPI Lite. The funds will sit in an escrow or designated account in the user’s bank.

The circular revealed that the replenishment of the wallet “shall only be allowed in the online mode with additional factor authentication (AFA) or using UPI AutoPay”, which in turn would have been registered by the user in online mode with AFA.

UPI will enable transactions of up to Rs 200 ($2.63) at a time, with wallet balances capped at Rs 2,000 ($26.33) to minimise the risk of loss of funds.

The report added that the launch of UPI Lite is in line with the Reserve Bank of India’s framework for facilitating small value digital payments in offline mode, which does not require internet or telecom connectivity.

NPCI’s circular, citing various studies on payment systems, observed that about 75%  of the total volume of retail transactions (including cash) in India are below Rs 100 ($1.32). It added that 50% of the total UPI transactions have a transaction value of up to Rs 200 ($2.63).

UPI processed 4,527.49 million transactions in February 2022, but all these were online. The aim is to target 1 billion UPI transactions daily in a mix of both online and offline in the next three to five years.

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