RBI rolls out features to deepen digital banking through UPI


Mumbai: The Reserve Bank of India (RBI) on Thursday announced a clutch of measures aimed at deepening the scope of digital payments, including the use of ‘conversational payments’ on UPI through AI and enhancing the transaction limit for small-value offline digital payments to 500.

Given that the unified payments interface (UPI) has transformed the digital payment ecosystem in India, RBI said, the addition of new features over time has enabled UPI to facilitate diverse payment needs of the economy. According to RBI, as artificial intelligence (AI) is becoming increasingly integrated into the digital economy, conversational instructions hold immense potential in enhancing ease of use, and consequently reach, of the UPI system.

“It is, therefore, proposed to launch an innovative payment mode – ‘conversational payments’ on UPI – that will enable users to engage in a conversation with an AI-powered system to initiate and complete transactions in a safe and secure environment,” it said.

This channel, RBI said, will be made available in both smartphones and feature phones-based UPI channels and would help deepen digital penetration. The facility will, initially, be available in Hindi and English and will subsequently be made available in more Indian languages, it said.

“Conversational payments can bring about immense possibilities of countless engagement and communication and also paves way for government’s collaboration with up-and-coming tech companies focused around AI,” said Rahul Tandon, chief product officer, Safexpay, a provider of payment and banking solutions.

RBI also proposed to facilitate offline transactions using Near Field Communication (NFC) technology, which it believes will not only enable retail digital payments in situations where internet or telecom connectivity is weak or unavailable but will also ensure speed. In September last year, RBI launched an on-device wallet called “UPI-Lite” to optimise processing resources for banks, thereby reducing transaction failures. On Thursday, RBI said the product has gained traction and currently processes more than 10 million transactions a month.

“Support for NFC-based tap-and-pay UPI payments initiation will further improve the ease-of-use of UPI apps for UPI-lite. Acceptance will likely be supported at the merchant end via the merchant’s mobile phone or via the merchant’s payment terminal,” said Harish Prasad, head of banking – India at fintech firm FIS.

Meanwhile, RBI proposed to increase the per transaction limit to 500 for small value digital payments in the offline mode. The overall limit would be retained at 2,000 to contain the risks associated with relaxation of two-factor authentication. RBI said that by removing the need for two-factor authentication for small value transactions, these channels enable faster, reliable, and contactless mode of payments for everyday small value payments, transit payments etc.

“In a broader context, the central bank’s concerted efforts to enhance the adoption and effectiveness of digital payments are fostering a robust and competitive environment for all stakeholders involved,” said Akash Sinha, chief executive and co-founder, Cashfree Payments.

The Reserve Bank Innovation Hub is also developing a digital public tech platform for delivery of frictionless credit. According to RBI, the end-to-end digital platform will have an open architecture, open Application Programming Interfaces (APIs) and standards, to which all financial sector players can connect seamlessly in a ‘plug and play’ model.

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Updated: 10 Aug 2023, 05:54 PM IST

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