Soon, Paytm and PhonePe will integrate the UPI Lite service
Unified Payments Interface (UPI) Lite solutions are being integrated into the unicorns of the fintech industry, Paytm and PhonePe, at advanced phases. Users will be able to conduct small-ticket transactions up to INR 200 thanks to this connectivity between Paytm and PhonePe.
According to a report from ET, PhonePe would implement UPI Lite on its digital payment app after Paytm launches UPI Lite on its app in a month. Slice, a fintech company sponsored by Tiger Global, is striving to make UPI Lite available on its app so that it can serve the young user base with low-value transactions.
It will be a good product for customers, and NPCI is eager for it to succeed so that it can open up the next phase of expansion for UPI. No PIN required will speed up transitions, which are a major consumer concern as UPI has gained popularity, the insider claimed.
The change comes a few days after the Centre reduced the incentive payments to fintech companies and banks that facilitate UPI transactions by nearly 30%, from INR 2,137 Cr to INR 1500 Cr.
One of the announcements made during the Union Budget for 2023–24 was the move.
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In essence, UPI Lite is a virtual wallet that enables users to conduct small-value transactions without the need for a physical wallet.
The UPI app will automatically use UPI Lite balance for transactions up to INR 200 once the virtual wallet has been loaded, in accordance with the NPCI standards for UPI Lite services, which eliminates the need for P2P transaction requests. While other players have yet to offer these services to UPI users, BHIM UPI is currently providing UPI Lite service to some consumers.
Users of UPI first need to authorise their issuing banks using their UPI pins in order to start the UPI Lite service. The issuing bank will then transfer money into the virtual wallet after that. The on-device virtual wallet will enable and reflect the balance in the UPI app as soon as the customer receives confirmation of the transfer of funds (from the issuing bank).
The virtual wallet will have a 200 INR transaction restriction and a 4,000 INR daily cap on total transactions. Users of UPI Lite can daily contribute up to INR 2,000 to their virtual wallet.
According to NPCI data, UPI clocked 803 Cr transactions worth INR 12.98 Cr in January, representing a 2.65% month-over-month (MoM) improvement over December 2022, when it clocked 782 Cr transactions for INR 12.82 Lakh.
While the governing body has not yet disclosed the breakdown of UPI apps by January 2023, in December 2022, three fintech players—PhonePe, Google Pay, and Paytm—captured more than 90% of transaction volume and value.
The Modi administration approved an incentive programme worth INR 2,600 crore in the same month to encourage RuPay debit cards and small-ticket UPI transactions for a calendar year beginning in April 2022.
The programme will provide acquiring banks with financial incentives to encourage Point-of-Sale (PoS) and e-commerce transactions utilising financial instruments.