“Paytm is likely to go live with its UPI Lite product on its app within a month, and PhonePe is expected to enable the offering after Paytm, which is closest to being live right now,” one of the persons said. Tiger Global-backed fintech Slice, which is also betting on its UPI play, is working to go live on UPI Lite as it focuses on a younger consumer base that makes small-ticket transactions.
In September last year, Reserve Bank of India governor Shaktikanta Das launched UPI Lite to make low-value UPI payments faster and simpler. UPI Lite is an on-device wallet feature that will allow users to make real-time small-value payments of up to Rs 200 without using a UPI PIN. At present, only debit from your wallet is permitted and all credits to UPI Lite, including refunds, will directly go to your bank account.
ETtech“It’s going to be a good product for consumers and NPCI has been keen for it to take off so it could unlock the next level of growth for UPI as well. No requirement of PIN is going to make transitions close faster – a growing issue among consumers as UPI has become popular,” one of the persons briefed on the matter said.
While Walmart-owned PhonePe has the largest market share of UPI transactions from consumers, Paytm is a distant third player after Google Pay – also commonly referred as GPay. In December 2022, PhonePe clocked 367.42 crore UPI transactions worth Rs 6.39 lakh crore, while GPay recorded 271.23 crore transactions worth Rs 4.40 lakh crore. Paytm recorded 105.41 crore transactions worth Rs 1.18 lakh crore, according to NPCI data. In December, BHIM saw merely 2.55 crore transactions worth Rs 8,400 crore.
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“The service (UPI Lite) has been live on BHIM UPI for some users, but bigger players onboarding the project could become the shot in the arm needed to distribute this product,” another source said.
About 75% of the total volume of retail transactions, including cash, in India are below Rs 100 in transaction value. Additionally, 50% of the total UPI transactions are also of value Rs 200 or less, according to an NPCI circular issued in March last year.
For new UPI entrants like Slice, this could be an opportunity to acquire new users.
ETtech“The education around loading money in an account will be an uphill task for mass market UPI apps. This will give a small window of opportunity to new players to build better experience around it,” one of the sources aware of the UPI Lite roadmap said.
Paytm did not respond to ET’s query. Spokespersons for PhonePe and Slice declined to comment while an email sent to NPCI seeking comment for the story did not elicit any response till press time Sunday.
How does it work?
The virtual wallet system was conceptualised as a part of the strategy to make low-value high-volume transactions more efficient, while reducing the potential burden on banking infrastructure from the growing UPI numbers.
The UPI Lite is an on-device wallet, or a virtual wallet, which users will have to enable and load with money from their bank accounts. The money loaded in the wallet can be used to make transactions without the PIN or even an active internet connection.
According to NPCI guidelines for UPI Lite, once the virtual wallet is enabled and loaded, the UPI app providing the service shall, by default, use UPI Lite balance for transactions having a value of up to Rs 200, excluding peer-to-peer collect request transactions.
The customer will have to first authorise the issuing bank, using UPI PIN, to enable the UPI Lite wallet. This request will prompt the bank to transfer funds from the customer account towards on-device wallet usage. Once the issuing bank confirms successful transfer of funds, the UPI Lite wallet is enabled, and the virtual balance is reflected in the UPI app.
The UPI Lite wallet will have a limit of Rs 200 on each transaction. Further, the cumulative usage per day has been capped at Rs 4,000, whereas the maximum amount that can be loaded into the virtual wallet is Rs 2,000.
The UPI Push
In January 2023, for the first time, UPI clocked over 8 billion transactions in a month but its overall growth in future has been a matter of debate to ensure how to keep growing on such a large transaction base.
In 2022, 7,400 crore digital payments worth Rs 126 lakh crore were made through UPI, finance minister Nirmala Sitharaman said during the budget speech last week.
Besides UPI Lite, the NPCI has initiated several other projects to bring in the low-value transaction consumers under the UPI umbrella. This includes UPI 123PAY, which is a solution developed for feature phone consumers to use UPI without internet connectivity.
Additionally, plans for UPI also include extending the service to credit cards, from only bank accounts currently, and acceptability of UPI internationally. So far, UPI services have already been enabled internationally on a selective basis in countries such as the UAE and some European countries.
Last month, the Union Cabinet approved a Rs 2,600 crore incentive scheme for promotion of RuPay cards and low-value UPI transactions. “In line with the objective of ‘Sabka Saath, Sabka Vikas’, the scheme will also promote UPI Lite and UPI 123PAY as economical and user-friendly digital payments solutions and enable further deepening of digital payments in the country, across all sectors and segments of the population,” the government had said while announcing the scheme.
Noida-based fintech company Paytm, while declaring its December-quarter earnings last week, said that it had received Rs 68 crore in incentives from the government for the last fiscal, and the company estimates that it will receive around Rs 130 crore for the year-ending March 31, 2023.