NPCI nearing pilot launch of wallet-based UPI payments

NPCI nearing pilot launch of wallet-based UPI payments

In a circular dated March 16, NPCI told UPI member banks that UPI Lite shall be launched as a pilot with multiple banks and app providers. After a due level of comfort, a full-scale commercial launch with compliance timelines for on-boarding for the issuers and app providers shall be declared. FE has seen a copy of the circular.

The National Payments Corporation of India (NPCI) is nearly ready for a pilot launch of wallet-based Unified Payments Interface (UPI) payments. Named UPI Lite, the on-device wallet service will be in line with the Reserve Bank of India’s (RBI) framework for offline digital payments. It will enable transactions of up to Rs 200 at a time with wallet balances capped at Rs 2,000.

In a circular dated March 16, NPCI told UPI member banks that UPI Lite shall be launched as a pilot with multiple banks and app providers. After a due level of comfort, a full-scale commercial launch with compliance timelines for on-boarding for the issuers and app providers shall be declared. FE has seen a copy of the circular.

In its first phase, UPI Lite will process transactions in near-offline mode, which means that while debit transactions from the wallet will happen in the offline mode, credits will be processed online. At a later stage, UPI Lite will process transactions entirely in the offline mode.

According to the circular, once UPI Lite goes live, UPI users will have the option to enable the on-device wallet on their app. The user can then allocate funds from their bank account to UPI Lite. The funds will sit in the user’s bank in an escrow or designated account.

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. Industry executives say the RBI has capped the per-transaction value in the offline digital payments framework at Rs 200 so that the risk of loss of funds can be minimised in the absence of AFA.

The NPCI circular cited studies to say that about 75% of the total volume of retail transactions in India, including cash, are of a value lower than Rs 100. Half of all UPI transactions have a transaction value of up to Rs 200.

NPCI believes UPI Lite will offer the advantage of a superior user experience and an uncluttered bank statement for users. It will also reduce the load on the core banking systems.

The launch of UPI Lite is among a series of measures aimed at making the UPI platform accessible to a larger set of users. Earlier this month, the RBI launched a UPI enablement for feature phone users. The payments ecosystem is also working to enable Aadhaar OTP-based UPI onboarding, which will not require users to have a debit card. Banks and other payment system players are expected to prepare their systems for launch by June 30.

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