Now 'UPI Lite' from NPCI for Small Value Transactions on "On-Device Wallet" :

As per RBI data, about 75% of the total volume of retail transactions (including cash) in India are below??100 transaction value. Further, 50% of the total UPI transactions are having a transaction value of up to??200/-.

To process billion-a-day transactions, entire UPI ecosystem will have to invest heavily in infrastructure upgrade. Large banks have already implemented upgrades, such as separate financial and meta transactions infrastructure, separate endpoints for payment service provider (PSP) / issuer and to provide better technical up time for UPI services, and such banks are getting ready to process three times of current volumes.

To realize the vision of billion-a-day payments within the next 3 to 5 years, National Payments Corporation of India (NPCI) has been aggressively innovating and adding new features in UPI from time to time to expand its usage. As an efficient strategy to process large-scale small value digital payments , NPCI has designed the?“UPI Lite?–?On-Device wallet”?(#UPILite”) functionality for UPI user (#User).

In phase 1, UPI Lite will process transactions in near offline mode i.e. debit offline and credit online, and at a later point, UPI Lite will process transactions in complete offline mode i.e. debit and credit both offline.

A User of UPI App will have the option to enable UPI Lite i.e.?“On-Device wallet”?on her/his UPI App. Once enabled, the User can allocate funds from her/his bank account to UPI Lite. Such funds shall reside with the User’s bank in an escrow / pool / designated account and such balance shall reside on-device on the common library (CL) of the User’s?UPI App.

• At present, only debit from UPI Lite balance shall be permitted and all credits to UPI Lite (including refunds, etc.) will be processed online in the User’s bank?account maintained in the?bank’s?core banking system.
• The upper limit of an UPI Lite payment transaction shall be??200/-.The total limit of UPI Lite?balance for an “On-device?wallet” shall be ?2,000/- at any point of time.
• Replenishment of funds in UPI Lite shall only be allowed in online mode with additional factor authentication (AFA) or using UPI AutoPay which has been registered by the User in online mode with AFA.

Advantage UPI Lite :

UPI Lite offers the following advantages to the UPI ecosystem:

1. Superior user experience using faster near real-time small value payments
2. Uncluttered bank statement for the User.
3. Reduction of load on core banking system of the member bank.

User experience on UPI Lite:

1. The UPI Lite balance shall be non-interest bearing.
2. The UPI Lite transactions shall be offered without AFA i.e. UPI PIN. However, it is recommended that the UPI App is accessed by the User with app passcode/device authentication (biometric, pattern, etc.) before performing the UPI Lite transaction, unless the User has disabled the app authentication.
3. The User can have multiple such UPI Lite on-device balances depending on the number of UPI Apps used by the User to access one designated bank account.
4. The User can enable, disable and top up the UPI Lite (only in online mode) at any point in time and the fund transfer between the UPI Lite and User’s bank account shall be processed in?real-time.
5. The UPI Lite balance shall be displayed on the home screen of the UPI App to eliminate the need of separate balance inquiry.
6. The UPI App shall, by default, use UPI Lite balance for transactions having value of less than or equal to Rs 200/- excluding peer-to-peer collect request transactions.
7. The User shall receive the consolidated debit SMS for financial transactions at regular intervals after the transactions are presented to the User’s?bank.
8. The UPI App shall mandatorily enable the User to raise disputes for UPI Lite based transactions. Members shall ensure that online dispute resolution (ODR) functionality is made available for UPI Lite transactions.
9. The issuing bank shall also facilitate the handling of customer grievances after the transaction information with respect to UPI Lite transactions is made available to these banks.
10. Instructions issued for “Harmonization of Turnaround?Time”?by RBI will be applicable to failed UPI Lite transactions.

UPI Lite will enable feature phone users to make digital payments from their bank accounts. NPCI has tested and approved 2 solutions for UPI Lite.

• SIM overlay solution ( hardware based )
• Software-provisioned solution that will leverage over-the-air (OTA) updates.

SIM Overlay is a technology that expands the functionalities of a phone’s SIM card, allowing payments and other services to be carried out even without data availability. OTA, on the other hand, will have the solution delivered straight to the device’s firmware.?

• The transaction on the SIM overlay will use a telecom network. The overlay will be embedded inside the phone by the telecom provider. The user will have to get it deployed (on their phone) by visiting a store.
• A Virtual Payment Address (VPA), usually called the UPI ID, will be created through SMS. Once the UPI ID is created, the payer has to select the contact to whom a payment needs to be made. If the contact, too, has a UPI ID, the payer will simply need to click on the name, enter the amount and send the money.
• The OTA solution would be akin to the snake game on erstwhile Nokia feature phones, which would get updates over the networks without 3G or 4G networks. However, it will be different from how it is conventionally done and the technology in play here is patent pending.
• Users will have to set up a four-digit or six-digit pin, depending on protocols their banks put in place. Payments made on the SIM overlay method will go to servers managed by the NPCI under the UPI system, and transactions occur over the regular UPI network from there.
• This entire process will run on SMS networks instead of the internet.

Small value offline mode for digital payments will provide an alternative, secure, low-cost mode of payments with a near-cash-type characteristic, thereby increasing consumer confidence as a preferred mode for small retail payments.It can provide impetus to several innovative use cases in terms of retail payments, such as ticketing, bundling of products, as well as non-standardized pricing.

This could eventually provide firms with “data and analytical tools to understand small payment patterns and offer innovative, customized solutions. Considering that feature phones still constitute 50% of the market, this will give a boost to payments where internet penetration is low.