What are on-device wallet for small UPI transactions?

Unified Payments Interface (UPI) has become one of the most preferred digital payment modes because of superior user experience and interoperability. 

The National Payments Corporation of India, an umbrella body for retail payments systems, has been innovating and adding new features in UPI from time to time to expand its usage and realise the vision of billion transactions per day in the next three to five years.

 Various studies on payment systems have found that about 75% of the total volume of retail transactions -- including cash-- in India is below ₹100 transaction value. And, 50% of the total UPI transactions have a transaction value of only up to ₹200.

To reduce the stress on the banking system and make the transaction process even simpler, the NPCI has come out with the ‘on-device’ wallet feature for UPI users.

Known as UPI Lite, it will facilitate small-ticket transactions. 

In phase 1, UPI Lite will process transactions in near offline mode i.e. debit offline and credit online. And later, UPI Lite will process transactions in complete offline mode.

Users will have the option to enable the On-Device wallet on their UPI app. Once enabled, they can allocate funds from their bank account to UPI Lite.

Such funds shall reside with the user’s bank in an escrow or pool or designated account. And such balance shall reside on-device on the common library (CL) of the UPI app. 

At present, only debit from UPI Lite balance would be permitted and all credits will be processed online in the user’s bank account maintained in the bank’s core banking system.

The upper limit of a UPI Lite payment transaction will be ₹200 and the total limit of UPI Lite balance for an on-device wallet will be ₹2,000 at any point of time.

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 on-device wallet balance will be displayed on the home screen of the UPI app to eliminate the need for a separate balance inquiry.

Further, the UPI app will, by default, use UPI Lite balance for transactions having a value of less than or equal to Rs 200 excluding peer-to-peer collect request transactions.