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RBI launches UPI for feature phones, here’s how it will work

A huge number of Indians have been using feature phones with no efficient way to digitally send and receive money.

The Reserve Bank of India (RBI) has launched ‘UPI123Pay’ that allows feature phones to carry out transactions even without the internet on the Unified Payments Interface (UPI) network, according to a press release issued on March 8. ‘DigiSaathi’, a 24×7 helpline to resolve customer queries was also announced.

UPI functions will be made available on feature phones through an app that would have to be installed on the device, as per the release. If that’s not possible, access to UPI can be ensured using Interactive Voice Response (IVR) calls, sound-wave based proximity detection, missed calls, and more.

UPI123Pay will allow more users, even from the lower rungs of society – financially speaking – to be a part of the UPI ecosystem, said RBI Governor Shaktikanta Das at a press conference.

In January 2022, the RBI had released a framework for offline payments on UPI after Das announced in December 2021 that the central bank was working on enabling UPI transactions on feature phones to make digital payments more inclusive. Presently, the ability to pay through UPI without internet, and on feature phones, is available through the National Unified USSD Platform (NUUP) after dialling ‘*#99’ on the keypad.

However, RBI Deputy Governor T Rabi Shankar said that the NUUP process is cumbersome as it involves multiple messages that have to be sent, which also carry charges, and not all telecom service providers offer the service right now. Thus, the new system is expected to fill in this gap and accommodate sections of the Indian population that use feature phones, which the RBI estimated to be 40 crore.

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How is UPI123Pay expected to work?

According to the press release, the initiative will allow payments in the following manner:

  • Missed call for PIN verification: To conduct a transaction, the user needs to give a missed call to the number displayed at a merchant counter. This number will call them back to confirm their UPI PIN for the transaction. The press release said that this mechanism can be used to access the bank account and perform transactions such as receiving and transferring funds, regular purchases, bill payments, etc.
  • Interactive Voice Response (IVR) calls to complete UPI on-boarding: UPI payments through pre-defined IVR numbers would require users to initiate a secured call from their feature phones to a predetermined number and complete UPI on-boarding formalities to start making financial transactions without an internet connection.
  • Proximity Sound-based Payments: This option would use ‘sound waves’ to enable contactless, offline, and proximity data communication on any device. The RBI did not provide more information on how exactly this would pan out. Further, while the RBI says there would be an app, it does not say how the app would be installed or downloaded.

Number of payment frauds increase with growth in digital payments

While the RBI’s moves to facilitate cheaper and more inclusive digital payments are welcome, concerns remain regarding the rapidly growing instances of digital frauds, which often go hand-in-hand with growth in digital payments. In January 2022, the Economic Survey 2021 showed that the UPI network was the largest payments retail system in the country.

At the press conference, Governor Das said that the helpline would be used to provide information about the system for users, resolve queries such as payments not going through, and even direct them to the right authorities for registering complaints. While this would currently provide information in Hindi and English, the RBI said that it would be expanded to more languages later.

Here’s a look at the scale of the problem based on state-wise fraud data obtained by the RBI and a parliamentary response regarding digital payments frauds in the Lok Sabha:

  • Consistent increase in card-based payment fraud: Almost all states have seen an exponential increase in frauds on card-based payments and internet banking between 2016 and 2020, the data suggested. Only 393 cases of fraud were reported in Haryana in 2016, for example, but that number went up to 5,605 cases in 2020. The number of frauds in Tamil Nadu increased from 540 cases in 2016 to 7,416 cases in 2019.
  • Highest fraud rates in Maharashtra: In terms of both the number of frauds and the amount involved in such frauds, Maharashtra exceeded all other states by a significant margin. The country has seen 26,522 cases of fraud in the last financial year, involving a total amount of Rs 67 crores. The next highest number was in Delhi, with a total of 7,774 reported cases. Other states with high numbers of reported fraud include Gujarat, Haryana, Karnataka, and Tamil Nadu.

Key points from the RBI’s framework for offline payments

The central bank said that only authorised Payment System Operators (PSOs) and Payment System Participants (PSPs) are permitted to provide offline payment services. Here are some of the measures they will need to comply with:

  • Transactions would be capped at Rs. 200 for a single transaction whereas the total limit for offline transactions on a payment instrument will be Rs. 2,000 at any point in time.
  • Offline transactions would have to take place in a ‘face-to-face’ mode only.
  • Authorised entities may offer offline payments using any channel or instrument like cards, wallets, mobile devices, etc.
  • Payment instruments shall be enabled for offline transactions based on the explicit consent of the customer.
  • Renewing the used limit for offline payments shall be allowed only in online mode with AFA.
  • The issuer will have to send transaction alerts to users as soon as transaction details are received. The RBI added that there is no compulsion to send an alert for each transaction; however, details of each transaction must be adequately conveyed to the customer.
  • All liabilities arising out of technical or transaction security issues at the merchant’s end shall be incurred by the acquirer.
  • Customers shall have recourse to the Reserve Bank– Integrated Ombudsman Scheme, for grievance redressal.

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I cover health technology for MediaNama but, really, love all things tech policy. Always willing to chat with a reader! Reach me at anushka@medianama.com

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