Banks hope to make Lite work of load with UPI help

UPI Lite, the new feature that will allow people to make small-value transactions using the Unified Payments Interface platform without entering any PIN, is a potential game-changer that could boost financial inclusion and first-time users’ trust, according to industry experts.

The feature, which was launched by RBI Governor Shaktikanta Das earlier this week, will also play a huge role in boosting the efficiency of banks in the world’s second-most populous nation.

"The UPI Lite feature will help in de-stressing the core systems of banks by processing transactions up to Rs 200," said George Sam, Director & Co-Founder, Mindgate Solutions, which is a UPI tech-enabler for top lenders including the State Bank of India, HDFC and Bank of Baroda.

Out of the about 600 million UPI transactions in August, about 40 per cent-42 per cent were in the low-value category, he told DH on Friday.

The feature will help in building the confidence of those in rural areas using UPI for the first time.

"It is a great move, especially for those new to UPI, as it would reduce the failure rate in small-value transactions, which plays a huge role in winning the trust of first-time UPI adopters," said Madan Padaki, founder and chief executive of village commerce network 1Bridge.

The next wave of growth is likely to come from Tier 3-6 locations as they have contributed to nearly 60-70 per cent of new mobile payment customers in the last two years, according to a June 2022 Boston Consulting Group (BCG) and PhonePe Pulse report on digital payments.

"The UPI Lite feature will take off and will be successful in a lot of small towns and benefit all stakeholders, especially banks, in reducing velocity on the core banking infrastructure," BCG Partner Vivek Mandhata told DH.

It will all come down to how payment apps build their wallets and the friction a customer feels while using them, he added, highlighting how wallets bring with them an extra step in the process which may not be as intuitive as using UPI.

Mindgate's Sam expects the UPI Lite feature to be adopted by more banks in the days to come as it would return higher success rates for transactions and help banks function faster.

Banking partners agreed.

“Launch of UPI Lite Service on UPI platform will enhance the payment experience for the customers making low-value payment on the go and will also help banks to make use of bank’s payment infrastructure more optimally," said Anil Tembhe, General Manager- IT eChannels of State Bank of India.