RBI rolls out new payment methods to further accelerate the adoption of digital payments among consumers in India

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The shift from cash to a cashless society in India has been a revolution and the one major factor that has resulted in this revolution is the Unified Payments Interface. Notably, the Unified Payments Interface (UPI) has substantially changed the way Indian consumers make payments. UPI has brought the benefits of the digital payment ecosystem to the masses in India. The consistent push from the Indian government, along with the emergence of new-age Fintech startups and consumer-payments apps, has helped the adoption and widespread popularity of UPI over the last few years.

Notably, UPI transactions account for over 68% of over 260 million digital payments processed daily in India, according to the Reserve Bank of India. Furthermore, over 250 million unique users and 50 million merchants have been onboarded on the UPI platform. During April to September 2021 period, the number of merchants accepting digital payments surged by 500% compared to the October to March 2019 period. In July 2022, the UPI transaction count crossed 628 crores with transaction value reaching 10.63 lakh crore.

Over the next five years, the Indian government is aiming to cross 1 billion UPI transactions per day. Consequently, to achieve its target and to further amplify the usage of UPI among consumers in the country, the government is innovating in the digital payments space and rolling out new payment methods, which will accelerate the digital payment landscape growth in India. For instance,

• In September 2022, the Reserve Bank of India (RBI) introduced UPI Lite, a digital payment interface for low-value transactions. The fact that consumers can make low-value transactions in near-offline mode makes it a game-changer, especially for consumers in rural areas, where access to the internet is still lagging. Notably, UPI Lite allows consumers with feature phones to make digital payments just like UPI allows for smartphone users.
• In the first phase of UPI Lite, transactions will be completed in near-offline mode. It means that consumers do not need to have an internet connection for debit transactions. For credit transactions, users need access to the internet. However, during the second phase of UPI Lite, the National Payment Corporation of India (NPCI) is planning to conduct both debit and credit transactions in offline mode. Currently, the upper limit for UPI Lite is set at INR 200 as it is aimed at low-value transactions.
• On the other hand, the total limit of UPI Lite on the wallet would be INR 2,000 at any given point. Initially, the customers of eight banks will be able to use the UPI Lite payment method. These banks include HDFC Bank, Canara Bank, Punjab National Bank, State Bank of India, Kotak Mahindra Bank, Indian Bank, Union Bank of India, and Utkarsh Small Finance Bank. Going forward, more banking partners are expected to launch the service for their customers across India.

Through the launch of UPI Lite, the RBI is aiming to onboard another 400 million users onto the UPI platform. Notably, the central bank also announced the launch of the RuPay credit card on the UPI network to accelerate digital payment adoption and market growth. Until now, only debit card users could make digital payments using the UPI network. Notably, the launch of UPI Lite and UPI credit card payment methods will further accelerate the adoption of digital payment methods in the country, boosting the transaction volume and value over the next few years. In addition to this, the RBI also announced the launch of cross-border inward bill payments using the Bharat Bill Payment System in September 2022.

The success story of UPI in India has also attracted some of the major economies around the world to launch the digital payment method in their own country. For instance,

• In August 2022, NPCI signed an MoU with PayXpert for the acceptance of UPI payments in the United Kingdom. This strategic collaboration will make the UPI payment method acceptable at all point-of-sale devices of PayXpert for in-store payments in the United Kingdom. Notably, NPCI has a similar arrangement for UPI in other countries such as France, Singapore, the United Arab Emirates, and Nepal.

Over the next three to four years, NPCI is expected to enter into more strategic collaborations with global players to launch and expand the acceptance of UPI across the world. In India, PayNXT360 expects UPI to further accelerate the shift toward a cashless society over the next few years, as the launch of UPI Lite for feature phones means that more consumers, especially those in rural areas, can now use the digital payment method for their daily transactions. 

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