UPI Lite – An Initiative towards De-cluttering the e-payment Congestion

UPI Lite – An Initiative towards De-cluttering the e-payment Congestion

UPI Lite

Four of the seven banks that were part of the recent UPI Lite launch by RBI & NPCI use Mindgate as their UPI Platform.

The growth of the digital payments industry in India has been commendable. Various digital products and emerging use cases such as UPI solutions, NETC Fastag, digital wallets, etc., continue to make inroads and garner the support of Indian customers.

UPI is one of the most popular online payment platforms that continue to dominate the digital payment space in the country. According to the latest reports, UPI holds 96.5 per cent market share in overall mobile payments and 56 per cent (volume-wise) in person-to-merchant payments. Factors such as convenience, faster transactions, and practical security features have made UPI payment a preferred choice for many.

Whether it’s about paying utility bills, mobile phone bills, or buying goods on e-commerce platforms, UPI platforms have turned into a preferred payment method for consumers. According to the National Payments Corporation of India (NPCI), in August 2022 the UPI achieved a significant milestone, processing over 6.6 billion transactions countrywide.

Understanding the Concept of UPI Lite 

The immense popularity and faster adoption of UPI payments have put a significant burden on banks’ core systems. To ease this load, RBI and NPCI have launched a new product on UPI rails – UPI Lite – that will process low-value transactions (below INR 200/-) without routing them to the bank’s core system. Such low-value transactions today contribute to more than 50% of the total volume processed.

  • UPI Lite is designed as an ‘on-device wallet’ for processing low-value transactions. It will initially target transactions of ₹200 or less.
  • All users of UPI will have the option to enable UPI Lite. It will be called “On-Device wallet”, and would be found on their UPI app itself.
  • The users will have to allocate funds from their bank accounts to the UPI Lite wallet; the UPI Lite balance limit is set to ₹2,000/- for now by NPCI.
  • While UPI Lite low-value payments will process without any additional factor authentication (AFA), users wanting to top up funds in UPI Lite will need to enter AFA or use UPI AutoPay.

Enabling Use of Credit Card on UPI Rails

Mindgate is the first mover with one of the public sector banks for the enablement of UPI for Credit Cards – a feature recently launched by the RBI Governor.

With the launch of Credit Card on UPI, Rupay Credit Card holders can now link their card to any UPI payment app to make merchant payments either by scanning a QR code or online. While the current directive from RBI enables this feature only for the Rupay Credit Card issued in the country, in due course the plan is to enable entire ~78 million credit cards issued in the country.

Registration process and transaction journey are kept similar to the current process to ensure a seamless payment experience for credit card users.

Use of Aadhar for UPI Enrolment

Customers wanting to enrol on UPI platforms today are required to have an active debit card linked to their bank account, which means a significant portion of the population is currently unable to use the UPI platform.

India has issued about 1.3 billion Aadhar Cards to citizens and residents, thus providing a proven mechanism to validate the customer/user. Leveraging the large base of Aadhar Cards issued in the country, NPCI has introduced Aadhaar OTP-based authentication to on-board the UPI users without the need for Debit card. This will increase the customer-base using UPI platforms.