NPCI launches on-device wallet feature for UPI users for small transactions

Initially, UPI Lite will process transactions for NPCI wallet in near offline mode i.e., debit offline and credit online.

The National Payments Corporation of India (NPCI) has come out with the 'on-device' wallet feature for Unified Payments Interface (UPI) users, which will be known as “UPI Lite”, for facilitating small ticket transactions. This is aimed at reducing stress on the banking system and making the transaction process even simpler.

In a circular issued to banks, NPCI said, 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.

"Initially UPI Lite shall be launched as a pilot with multiple banks and app providers, and after a due comfort is achieved, the full-scale commercial launch with compliance timelines for on-boarding for the issuers and app providers shall be declared," the NPCI said.

The Reserve Bank of India (RBI) in its December 2021 monetary policy meeting had proposed the idea of an 'on-device' wallet in UPI apps for small ticket transactions, which will conserve banks’ system resources, without any change in the transaction experience for the use. Later, the central bank had issued guidelines that the upper limit of an offline payment transaction will be Rs 200 and there will be an overall limit of Rs 2,000 on a payment instrument at any point in time until the balance in the account is replenished.

The idea of an 'on-device' wallet for UPI users emanated from the fact that nearly 50 per cent of the total UPI transactions have a transaction value of up to Rs 200. And these low-value transactions utilise significant system capacity and resources of the banking system. At times, it leads to customer inconvenience due to transaction failures.

The NPCI circular says a user of UPI App will have the option to enable UPI Lite i.e. 'On-Device wallet' on their UPI App. Once enabled, the user can allocate funds from their bank account to UPI Lite. Such funds shall reside with their bank in an escrow/pool/ designated account and such balance shall reside on-device on the common library (CL) of their 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 NPCI said.

The upper limit of any transaction done through UPI Lite will be Rs 200 and total limit of UPI Lite e balance for an 'on-device' wallet would be Rs 2,000 at any point of time. Also, replenishment of funds in UPI Lite will 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, the NPCI circular stated.  

It is important to note that the UPI Lite balance will be non-interest bearing. Also, transactions through UPI Lite will be done without AFA i.e., the users do not have to key in the 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”, the NPCI said.

Further, UPI users can have multiple UPI Lite on-device balances depending on the number of UPI apps used by the user to access one designated bank account. And, they can enable, disable and top up the UPI Lite at any point in time and the fund transfer between the UPI Lite and User’s bank account will be processed in real-time.        

NPCI is of the opinion that this “on-device” wallet feature will go a long way in achieving its pipe dream of processing one billion transactions a day in the next 3-5 years.