How will UPI Lite allow payments without internet?

According to media reports published late in January this year, the National Payments Corporation of India, or NPCI, has been testing a new solution that will enable Unified Payments Interface-based digital payments without an active internet connection.

The new solution, which is called UPI Lite, will arguably be the first one used to enable digital payments under 200 rupees in rural areas.

Why is this important? Because many Indians don’t have smartphones, and the mobile internet connection in rural areas can be glitchy. But, with UPI Lite, feature phone users will be able to make digital payments from their bank accounts. Consider the numbers. According to one financial daily, India still has about 350-400 million feature phone users.

According to experts, an offline mode for digital payments, especially for small-value transactions, will provide consumers with an alternate, secure, and low-cost mode of payments with near-cash-type characteristics.

This could become a preferred mode for small retail payments. It will also give a boost to payments in areas where internet penetration is slow.  

To make UPI Lite a reality, two key solutions are reportedly being tested. The first is a SIM overlay, and the other is a software-provisioned solution that will leverage over-the-air updates.

All of this comes against the backdrop of the Reserve Bank of India enabling offline digital payments. In early January this year, the RBI issued a framework that allowed offline payments up to 200 rupees per transaction, subject to an overall limit of 2,000 rupees. The aim of this step is to push digital transactions in semi-urban and rural areas.

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