Paytm on February 24 announced that it is launching support for UPI Lite on its app. Although not the first UPI app to support this feature (BHIM has been supporting it for a while now), Paytm’s full-page ads in leading newspapers have brought more attention to UPI Lite, which some have praised as yet another innovation in the UPI ecosystem that brings many benefits to users, while others have poked fun at it for being the same as prepaid wallets that existed before UPI became popular.
Very proud of launching with @UPI_NPCI our latest in commitment to payments that are scalable and never fail.
Upgrade your UPI experience by switching to @Paytm App !
Here payments never fail, tx are super fast and you don’t see clutter in your bank statement! All this 🚀🚀 pic.twitter.com/c1tr7J4V3A
— Vijay Shekhar Sharma (@vijayshekhar) February 24, 2023
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What is UPI Lite: The National Payments Corporation of India (NPCI) launched UPI Lite in March 2022, calling it a wallet for small-value transactions.
What are the benefits of UPI Lite: The following are some key features:
- Offline use: Users don’t have to be connected to the internet to make payments using UPI Lite. This is particularly helpful in regions where internet connectivity is lacking and even in urban areas where the internet is patchy. To start with, “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,” NPCI explained.
- No PIN required: Users don’t have to enter UPI PIN for each transaction. NPCI, however, recommends that the user’s device has some kind of passcode or biometric authentication enabled.
- No failures and reduction of load on banking systems: Supporting UPI is a resource-intensive task for banks and UPI apps, which is why you sometimes run into payment failures when there is an overload at your bank’s servers. UPI Lite takes off the load from banks and UPI apps as the transactions will be processed by your mobile. This also means you are far less likely to run into payment failures with UPI Lite.
- Faster transactions: UPI Lite will be faster than UPI for two reasons: 1) No PIN is required and 2) No communication with the bank is required.
- Cleaner bank statements: Bank statements will only reflect UPI Lite wallet loads and not all transactions that were done using UPI Lite, which will be reflected on the UPI app instead.
How will UPI Lite work:
- Enable UPI Lite: Users will first have to enable UPI Lite on their UPI app (when the app and the user’s bank start supporting the feature). A user can have more than one UPI Lite wallet on their device. Users can can open a wallet with each UPI app that supports it and the same bank account can be used for this purpose. For example, you can have one UPI Lite wallet on Paytm app and one on BHIM app and both can be connected to the same bank account.
- Transfer funds: Users can then transfer funds to the UPI Lite wallet from their bank accounts using the normal UPI. “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,” NPCI explained. These funds will be non-interest bearing.
- Pay: Once there are funds in the UPI Lite wallet, users can use the same to pay to any merchant that accepts UPI, subject to certain limits outlined below.
- Disabling UPI Lite: Users can disable their UPI Lite account at any time and have the balance funds credited back to their bank account.
UPI seems to have come full circle – from being a wallet killer to now launching a wallet-like feature with UPI-lite.
(don't know the technical details, but operationally sounds similar).
— Osborne Saldanha (@os7borne) February 24, 2023
What are the limitations of UPI Lite:
- Per transaction limit: UPI Lite can only be used for transactions up to ₹200.
- Total wallet limit: The UPI Lite wallet can have a maximum balance of ₹2000 at any point in time.
- Cumulative usage per day: UPI Lite can be used for a maximum daily limit of ₹4,000.
Why only ₹200 per day: UPI Lite can only be used for small-value transactions because it works without PIN. Allowing large-value transactions pose a definite security risk. While the ₹200 limit might appear low, NPCI stated that 50 percent of total UPI transactions have a value of up to ₹200 and 75 percent of the total volume of retail transactions (including cash) in India are below ₹100 transaction value.
Which apps and banks support UPI Lite at the moment:
- BHIM: BHIM supports UPI Lite on both its Android and iOS apps with the following banks: State Bank of India (SBI), Union Bank of India, Utkarsh Small Finance Bank, Canara Bank, HDFC Bank, Kotak Mahindra Bank, Indian Bank, and Punjab National Bank.
- Paytm: Currently only Paytm’s Android app supports UPI Lite with the following banks: 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.
Not available on jailbroken and rooted devices: NPCI has asked UPI apps to ensure that they don’t provide UPI Lite on devices that are jailbroken or rooted. Without getting into the technicality of what this means, when an Android device is rooted or an iOS device is jailbroken, the device’s security is compromised and bad actors can easily find a way into such devices.
How will disputes and grievance redressals be addressed: UPI apps that support UPI Lite must put in place a system for users to raise disputes related to UPI Lite transactions, including providing users access to an online dispute resolution (ODR) functionality. “In case of any disputes, the UPI App shall display status of the funds being credited to the User’s bank account as per the dispute management process,” NPCI explained. The user’s bank is also responsible for handling of customer grievances related to UPI Lite transactions. Ultimately, if all else fails, the user will also have recourse to the Reserve Bank – Integrated Ombudsman Scheme for grievance redressal.
What to do when changing phones: “UPI Lite balance should be treated equivalent to cash and in case the user changes the mobile device, the user should disable the Lite account from old mobile device & then enable a new Lite account on the new mobile device,” NPCI advised.
What led to the development of UPI Lite: UPI Lite was designed by NPCI as part of RBI’s pilot experiments on offline transactions conducted across India from September 2020 to June 2021. Following these experiments, RBI January 2022 released the Framework for facilitating small value digital payments in offline mode. Under this framework, we can expect more such offline payment options for small-value transitions such as using cards, wallets, mobile devices, etc.
“Offline transactions are expected to give a push to digital transactions in areas with poor or weak internet or telecom connectivity, particularly in semi-urban and rural areas.” — RBI
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