India is testing internet-free digital UPI payments

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

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

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

SIM Overlay consists of extending the functions of a phone’s SIM card, allowing payments and other services to take place even without the availability of data. Meanwhile, OTA has the solution delivered directly into the device’s firmware.

According to the bank official, the OTA solution would be similar to the snake game on Nokia phones that receive updates over the network, without 3G or 4G capabilities. However, the technology is patented and will likely look different in practice than the conventional way.

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

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

Shah added that this could give impetus to more retail payment use cases, such as ticketing, product bundling and non-standard pricing. The Indian government has been working on more digital transactions, although this could hurt Visa and Mastercard.

Related: India’s digital payments incentive could come at the expense of Visa, Mastercard

In December, the cabinet said it had approved an incentive scheme that would provide 1,300 crores or $170 million in refunds to merchants as part of the Merchant Discount Rate, the levy on electronic payments that merchants face.

Acquiring banks will now be “encouraged” to pay some of the transactions associated with the RuPay cards and lower OHIM-UPI digital payments.



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