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New UPI features: Offline payments using NFC on UPI Lite, conversational payments using AI, and more

Due to demands, RBI has proposed to increase the per transaction limit to Rs 500 while maintaining the Rs 2000 overall limit per wallet.

The Reserve Bank of India on August 10 announced three upcoming features on Unified Payments Interface (UPI):

  • Offline payments using NFC from UPI Lite: In addition to payments through the commonly used QR codes, payments will soon also be possible using Near Field Communication (NFC) technology. This will specifically be allowed for offline transactions using UPI Lite, an on-device wallet feature launched in March 2022 for small-value transactions. You can read more about UPI Lite in our explainer here. NFC is a contactless payment method where you bring an NFC-enabled smartphone near an NFC-enabled payment terminal to complete a transaction. It’s a popular form of contactless payment abroad.
  • Conversational payments in UPI: This feature will allow users to make payments by engaging in conversation with AI-powered services. For instance, you can ask Google Assistant to transfer money to one of your contacts. “This channel will be made available in both smartphones and feature phones-based UPI channels, thereby helping in the deepening of digital penetration in the country. The facility will, initially, be available in Hindi and English and will subsequently be made available in more Indian languages,” RBI informed.
  • Increase in transaction limit on UPI Lite: Currently, UPI Lite can only be used for transactions of up to Rs 200 and the UPI Lite wallet can only have a maximum balance of Rs 2000 at any point in time. This is because UPI Lite works without PIN and allowing large-value transactions poses a definite security risk. However, due to demands for enhancing these limits, RBI has proposed to increase the per transaction limit to Rs 500 while maintaining the Rs 2000 overall limit per wallet.

RBI said that it will issue more detailed instructions on all of the above three features shortly.

Why does this matter: The offline UPI Lite feature, as well as the conversational payments feature, can both be useful in increasing the reach of UPI, especially in regions with bad network connectivity and demographics with low adoption. The integration of UPI with NFC also adds a useful convenience feature because NFC-based payments are generally faster than QR code-based payments.

What’s unclear: It is not clear if offline payments from UPI Lite will only work through NFC or if offline payments will also be possible using traditional QR codes. If it’s the former, then the merchant will need to have an NFC-enabled terminal to accept these payments, which is a tall ask, especially in regions with poor connectivity and digital penetration. Unlike QR codes, NFC-enabled devices also pose a monthly rental cost that many smaller merchants will not be ready to bear.

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