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The country’s central bank, the Reserve Bank of India (RBI), has introduced new features to the Unified Payments Interface (UPI). These modifications have the potential to transform the landscape of online payments, streamlining transactions through artificial intelligence (AI) technology.
UPI was developed under the Digital India initiative and is run by RBI. It is a system that powers several bank accounts into a single mobile application (of any participating bank), merging several banking features.
RBI will introduce three new additions for offline UPI payments. It proposes the concept of ‘conversation payments,’ which involves using AI-powered systems to facilitate payments through conversations. Users will soon be able to ask an AI-powered system to make payments on their behalf. Although specific details on this functionality are yet to be revealed, the government has said that the feature will initially be available in Hindi and English. It will be expanded to include more languages later.
RBI Governor Shaktikanta Das unveiled these measures during the announcement of the outcomes of the central bank’s bi-monthly policy review. The features will be available on both smartphones and feature phones-based UPI channels.
The second feature involves RBI increasing the transaction limit for UPI Lite from IN 200 (US$ 2.4) to IN 500 (US$ 6). UPI Lite, introduced by the National Payments Corporation of India (NPCI) in September 2022, facilitates quick small-value transactions by optimising bank processing resources, which effectively reduces transaction failures.
Initially, it enabled users to conduct transactions of up to IN 200 (US$ 2.4) per day without needing a pin code, which reduced the transaction time. Although the transaction limit has now been raised to Rs 500, the UPI Lite balance ceiling has been left unchanged at IN 2,000 (US$ 24) to manage the potential risks connected to the relaxation of two-factor authentication.
The RBI Governor Shaktikanta Das also unveiled the introduction of offline UPI payments facilitated by near-field communication (NFC) technology through UPI Lite. This advancement simplifies the payment process, requiring users to merely tap their smartphones on point-of-sale (PoS) machines to initiate transactions.
Over the past two years, India has offered to link UPI with several countries, aiming to expand its reach and collaboration in the realm of digital payments. In February, RBI and the Monetary Authority of Singapore (MAS) linked Singapore’s PayNow with UPI. As OpenGov Asia reported, customers of eligible financial institutions in both Singapore and India can avail of the facility to transfer funds in real-time between their bank accounts or e-wallets, enabling seamless cross-border transactions.
Users can transfer money using a mobile phone number, UPI identity, or Virtual Payment Address (VPA). The connection provides customers with a secure, user-friendly, and cost-efficient solution for conducting cross-border fund transfers. PayNow-UPI linkage is the first-ever real-time payment systems linkage to use a scalable cloud-based infrastructure that can handle future increases in the volume of remittance traffic. It is also the first linkage to have a non-bank financial institution as a participant. The linkage incorporates the automatic integration of capital control regulations to enhance efficiency. MAS and RBI will evaluate and gradually expand the linkage by adding more participating financial institutions and expanding applicable use cases.
