India tests digital UPI payments without internet

The National Payments Corp. of India is testing a solution to enable digital payment based on the Unified Payment Interface (UPI) without an internet connection, Mint reported on Sunday, January 23.

The solution, called UPI Lite, will likely initially be used in rural areas to enable small digital payments under Rs 200.

It will also allow phone users to make digital payments from their bank accounts. A bank official told the outlet that two solutions were being tested, including a SIM overlay and a software solution that leverages over-the-air (OTA) updates.

SIM overlay involves extending the functions of a phone’s SIM card, enabling payments and other services even without data availability. Meanwhile, OTA will let the solution be delivered directly to the device firmware.

According to the bank official, the OTA solution would be comparable to the snake game on Nokia phones receiving updates over the network, without 3G or 4G capabilities. However, the technology is patent pending and will likely be different in practice compared to how it is used conventionally.

These developments come as India has seen more digital payments, following the demonetization of banknotes in 2016.

“The offline small value mode for digital payments will provide an alternative, secure and low-cost payment method with a near-cash-like feature, thereby increasing consumer confidence as the preferred mode for small retail payments” , said Monish Shah, partner at Deloitte India.

Shah added that this could give impetus to more use cases with retail payments, such as ticketing, product bundling and non-standard pricing. The Indian government is working on more digital transactions, although this could end up hurting Visa and Mastercard.

Related: The push for digital payments in India may come at the cost of Visa, Mastercard

In December, the cabinet said it had approved an incentive scheme, which would see 1,300 crore, or $170 million, for reimbursements to merchants under the merchant discount rate, fees for electronic payments faced by merchants by banks.

Acquiring banks will now be “encouraged” to pay for a portion of transactions related to lower value RuPay cards and BHIM-UPI digital payments.



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