RBI deepens digital pay infra, launches UPI for 400 mn feature phone users

UPI is on course to reach Rs 100 trillion in value of transactions, said Governor Shaktikanta Das

To deepen the adoption of digital payments in the country, the Reserve Bank of India (RBI) on Tuesday launched a Unified Payments Interface (UPI) for feature phone users. This will ensure further democratisation of UPI in the country and make digital payments more inclusive by including the participation of people belonging to the economically lower strata of society.

The UPI for feature phone users will be known as UPI123Pay, and will have almost all the features of UPI that are there on smartphones. The UPI can, in fact, be used on the feature phones even currently, but the process is USSD based, which is cumbersome, resulting in it not taking off in a significant manner. Hence, it is expected that UPI123 Pay will fill in the gap and take adoption of digital payments and UPI to the next level.

In India, there are roughly 1.18 billion mobile phone users of which 780 million use smart phones, and the rest use feature phones. So, a large chunk of the consumer base, who are feature phone users, had limited options when it comes to digital payments.

In his statement in December, the RBI Governor Shaktikanta Das had indicated about RBI's intention to launch UPI-based payment products for feature phone users, leveraging on innovative products from the RBI’s regulatory sandbox on retail payments.

“We believe the innovative functionalities offered on feature phones will provide a push to UPI in various geographies across the country and will transform the way payments are perceived”, said Biswamohan Mahapatra, Chairman, National Payments Corporation of India (NPCI), the umbrella organisation for retail digital payments in the country.

Further, enabling UPI for feature phone users will help NPCI in realising its target of processing 1 billion transactions a day. Also, it will give a boost to RBI’s objective of achieving a less cash economy.

“While we have been growing impressively in terms of digital payments, with number of transactions growing over 5 times, but a large part of this digitisation is getting limited to people who have a smart phone”, said Deputy Governor, T Rabi Sankar.

“There are 400 million feature phone users and for them the choices are substantially limited and given the fact that this five-fold increase in transactions is contributed substantially by UPI, it is important that if we have to go to the next stage of development, we will have to think of ways in which UPI available in an offline mode and feature phones, Rabi Sankar said.

Das said, “ India’s digital economy has flourished over the past few years and UPI has played a major role in this process recording 4.53 billion transactions, worth Rs 8.26 trillion in February. In fact, in FY21, the total value of transactions done on UPI was about Rs 41 trillion. In the current financial year so far, the total value of transactions is Rs 76 trillion. So, we are well on our way to reach, hopefully, a transaction value of Rs 100 trillion on UPI”.

The transactions processed so far in this financial year is almost double the number of transactions (in volume terms) reported in FY21, reflecting the increased adoption of digital payments in the country, especially UPI. Further, with one month remaining in the financial year, UPI has achieved the goal of over 40 billion transactions in FY22 set by NPCI’s CEO. In CY21, UPI had processed more than 38 billion transactions, amounting to Rs 71.59 trillion.

NPCI has set itself a target of 1 billion transactions a day on the UPI platform in the next 3 – 5 years. “To achieve this milestone in the next 3-5 years, it is imperative that we follow the three “zero” approaches – zero touch (contactless), zero time (it has to be faster than cash), and zero cost to the customer. If these three “zero” come along then 1 billion transactions a day will happen in the next 3 – 5 years’ time, Dilip Asbe, NPCI CEO had said.

Launched in 2016, UPI crossed 1 billion transactions in October 2019. The next 1 billion came in under a year. In October 2020, UPI processed more than 2 billion transactions. The journey from 2 billion transactions a month to 3 billion was traversed in 10 months, but it took only three months for the payment platform to reach 4 billion transactions per month, from 3 billion.