Soon, tap & pay offline via UPI: To work where internet isn't available

India is developing a new Unified Payments Interface (UPI) capability to enable payments without needing an internet connection on either the customer’s device or the merchant’s point-of-sale (PoS) terminal, three people familiar with the matter said. This  opens up use-cases such as payments on flights and underground trains.

 

The UPI operator, National Payments Corporation of India (NPCI), is likely to certify PoS devices of the country’s leading merchant terminal manufacturers to enable offline UPI payments this year.  

 

Users will be able to tap and pay at offline merchant terminals using near-field communication (NFC) technology, with transactions capped at ₹2,000, replicating the card-tap experience users are already familiar with.

 

This is not the first time that NPCI is making use of NFC technology.

 

In 2023, it rolled out UPI Lite X to enable offline transactions between two NFC-enabled smartphones. The capability now under development extends this to PoS machines, allowing merchants to accept offline payments for the first time. The move is also expected to narrow down one of the last remaining gaps between the real-time payments system and card networks.

 

“PoS companies will need a certification from NPCI to accept UPI in an offline setting. They can create an application on top of it after they get certified,” a person at a fintech firm with knowledge of the matter said.

 

An email sent to NPCI with queries on the matter did not elicit a response till press time.

 

A PoS terminal is a hardware device used to accept different forms of digital payments such as debit and credit cards, prepaid payment instrument (PPI) cards, and mobile wallets, among others. 

 

“This is an NFC-driven use-case for UPI apps. You will tap using the app. Even if the terminal is offline, you can pay up to Rs 2,000. It will capture the authorisation and send it later for verification once the network is restored,” a second person said.

 

The person added that work is also underway at banks and UPI third-party payment providers to enable the feature within their own apps.

 

According to the first person quoted above, customers will be able to load money on their on-device UPI Lite wallet account to transact in environments where their device and the acceptance device are offline.

 

The tap-to-pay feature using NFC would imply that users would be able to transact without the need to punch in their mobile personal identification numbers (MPINs).

 

The new capability closes a gap that has, until now, favoured cards, which have long supported offline transactions through chip-based authorisation — an option UPI has lacked at the point-of-sale terminal.

 

“Some of the card issuers have restricted the use of cards on airlines because of some operational issues. This opens up an opportunity (for UPI) also because the transaction limits are small to start with. It is a relevant use-case,” the second person quoted above said.

 

While Lite X enables offline payments, UPI Lite acts like an on-device, e-payments wallet for PIN-less transactions.

 

UPI clocked 22.71 billion transactions with a total value of Rs 22.02 trillion in June. 

Ease of payment 

• Capability for offline UPI transactions at PoS terminals being developed
• After an offline authorisation is captured, the transaction will be verified when device is online next
• Transaction will involve tapping NFC enabled app on phone to device
• Currently, UPI Lite X allows offline transactions between NFC enabled phones