Paytm, PhonePe Soon To Integrate UPI Lite Offering

Fintech unicorns Paytm and PhonePe are in the advanced stages of integrating Unified Payments Interface’s (UPI) Lite offerings into their digital payment apps. Through this integration, Paytm and PhonePe will enable users to make small-ticket transactions of up to INR 200 without using a UPI pin to users.

As per an ET report, Paytm will go live with UPI Lite on its app within a month and post that, PhonePe would introduce UPI Lite on its digital payment app. Meanwhile, Tiger Global-backed slice is working on enabling UPI Lite on its fintech app, catering to the young consumer base with small-ticket transactions. 

“It is 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,” a source said.

The development comes a few days after when the Centre slashed the incentive allocation of fintech players and banks facilitating UPI transactions by about 30% to INR 1500 Cr from the earlier outlay of INR 2,137 Cr. 

The move was one of the announcements made during the Union Budget 2023-24.

In essence, UPI Lite is a virtual wallet that allows users to make low-value transactions without using a UPI pin or internet connection. 

As per the NPCI guidelines for UPI Lite offerings, once the virtual wallet is loaded, the UPI app will by default use UPI Lite balance for making transactions amounting up to INR 200 and thus, eliminating the P2P transaction requests. At present, BHIM UPI is offering UPI Lite service to some users while other players are yet to include these services to UPI users. 

To activate the UPI Lite service, UPI users first need to authorise their issuing banks via UPI pin. Following this, the issuing bank will transfer funds into the virtual wallet. Once the customer gets confirmation about the transfer of funds (from the issuing bank), the on-device virtual wallet will enable and reflect the balance in the UPI app. 

The virtual wallet will have a transaction limit of INR 200 and will cap cumulative transactions up to INR 4,000 every day. Meanwhile, UPI Lite users can add up to INR 2,000 in their virtual wallet every day.

In the month of January, UPI recorded 803 Cr transactions worth INR 12.98 Cr showing 2.65% month-on-month (MoM) growth as compared to December 2022, where it clocked 782 Cr transactions worth INR 12.82 Lakh, as per NPCI data.

While the UPI app-wise breakdown of January 2023 is yet to be released by the governing body, in December 2022, three fintech players PhonePe, Google Pay and Paytm captured more than 90% of transaction count and transaction value. 

During the same month, the Modi government approved an incentive scheme worth INR 2,600 Cr for promoting RuPay debit cards and small-ticket UPI transactions for a period of one year, starting from April 2022.

The scheme will offer financial incentives to acquiring banks in promoting Point-of-Sale (PoS) and ecommerce transactions using financial tools.