Why the UPI wallet is needed to future-proof the world's largest real-time payment platform

[Prakat]

In March this year, the National Payments Corporation of India (NPCI) released a circular introducing the UPI Lite concept, an on-device wallet on an UPI app. The NPCI, which launched and operates the UPI, is seeking to achieve a two-fold objective with the UPI Lite. 

 

First, it wants to reduce the toll that UPI transactions are taking on banks’ payments infrastructure by reducing the number of hops in the process. “If UPI scales further, the reliability of the infrastructure will become a problem in the future, and this product is meant to help with that,” said the payments executive I spoke to. As of July, UPI was recording 6.2 billion transactions a month. 

 

Second, UPI Lite is meant to enable offline UPI payments. Even if the sender’s bank is facing network issues, as long as the receiver’s bank is up and online, a UPI wallet transaction can go through. “Eventually, both legs can be offline and the transaction should still be able to go through,” the executive added. This would be useful in scenarios like paying for parking in a mall, where there could be network issues. The unintended benefit is that it would also help users avoid crowding their banking statements with small transactions.

 

Here’s how it’s meant to work.

 

Once the user gives their approval, a wallet will be created within the payment app you use. But you can only use this wallet to make payments that are no more than Rs 200 (US$2.5). For larger transactions, users will have to use regular UPI. While you may load up to Rs 4,000 (US$50) into the UPI wallet per day, the maximum balance that can be maintained on the wallet at any time is Rs 2,000 (US$25). 

 

But I suppose a user can get around this limit if needed by loading wallets across multiple UPI payment platforms. 

 

According to the payments executive, the way this is being implemented,  payments above Rs 200 will be automatically deducted through regular UPI. If it’s less than Rs 200, it will be dedicated from the wallet, provided it has enough balance. 

 

As far the receiver is concerned though, they will get the money in their bank account. (It seems the receiver can’t escape the curse of crowded bank statements.)

I’ve saved the biggest deal for last though. Because according to the executive, what will make this wallet stand out from all the others out there is that the user will not have to enter any KYC (know-your-customer) details. Also users can create such a wallet on every payment app they use. Users can also use it to make only payments and not to receive cash, and they also won’t need to enter any PIN, unlike UPI transactions today. 

 

“If users adopt this in a big way, it would eventually make way for UPI to completely edge out cash even for smaller value transactions,” the executive said.

 

sauce: https://the-ken.com/kaching/a-glimpse-of-what-the-upi-wallet-will-look-like/