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UPI Lite was launched specifically for small-ticket transactions, is a simplified version of UPI.
Know what is UPI Lite
Over the past few years, digital wallets have played a significant role in revolutionizing payment experiences for customers in India. Wallets, like Paytm, Amazon Pay, etc offered the first frictionless digital payment experience, long before UPI came into the picture. By linking wallets to merchant apps, users could pay with just a single click—no need for complex authentication processes like entering card details, using 3D secure protocols, or undergoing the multi-step login and OTP processes involved in net banking. This seamless experience, seen in transactions like post-Uber rides, allowed for silent payments, which significantly boosted adoption.
However, wallets came with one small friction point: they required users to pre-load funds from their bank accounts. This created an additional step between the customer and their purchase. UPI (Unified Payments Interface) changed the game by allowing direct debit from bank accounts, completely removing the need to top up a wallet. With just a 4-digit/6-digit PIN, UPI made payments easier, faster, and more direct. The impact was immediate, with wallet transactions dropping in popularity as UPI quickly became the preferred mode for digital payments.
What is UPI Lite?
UPI Lite, launched specifically for small-ticket transactions, is a simplified version of UPI. It offers convenience of wallet-like functionality without requiring a wallet license or the associated regulatory complexities for Payment Service Providers (PSPs) and Third-Party Application Providers (TPAPs). UPI Lite allows for single-click payments, without the need for PIN entry for low-value transactions, while also decluttering users’ bank statements from being overwhelmed by numerous small-value transactions.
The recent developments in UPI Lite have made it even more attractive for users. Two notable changes include:
1. Auto Top-Up Feature: Introduced during the Global Fintech Fest (GFF), this feature addresses the friction users faced with having to manually load UPI Lite. Now, UPI Lite can automatically top up when the balance falls below a certain threshold, ensuring a seamless, uninterrupted payment experience—much like the auto-recharge function popular in mobile wallets.
2. Increased Transaction Limits: Initially capped at INR 200, the per-transaction limit was raised to INR 500 and then to INR 1000, significantly expanding the scope of transactions that UPI Lite can handle. This, coupled with the increased balance cap from INR 2,000 to INR 5,000, has made UPI Lite much more versatile for daily transactions, making it an efficient alternative to wallets for small-value purchases.
Further Improvements Needed for UPI Lite
While UPI Lite brings several advantages, some areas need further enhancement to fully realize its potential:
1. Lack of Interoperability: UPI, at its core, is an interoperable payment platform, allowing users to link a single bank account across multiple PSP or TPAP apps. However, UPI Lite is currently app-specific and does not share this interoperability. For users, leveraging multiple apps, means creating separate UPI Lite balances for each PSP/TPAP app, which complicates the user experience.
Ideally, UPI Lite should offer one balance that can be used across multiple apps, similar to how a bank account is linked across platforms. Unless UPI Lite enables offline payments—where either the payer, payee, or both are not online—this lack of interoperability seems like a missed opportunity.
2. Enhanced Transactional Views: While some PSPs/TPAPs provide downloadable transaction statements for UPI Lite, there is no standardized approach across all platforms. This creates confusion for users, especially if they have multiple UPI Lite accounts. There should be a centralized system—ideally maintained by the issuing bank or NPCI—where users can access an overview of all their UPI Lite accounts, balances, and transaction histories in one place, similar to how they view their bank statements. Currently, as a user, it’s difficult to even remember where I have created UPI Lite accounts, and it’s challenging to track balances across different platforms. A unified, standardized statement system would significantly enhance user experience and transparency.
Conclusion
UPI Lite is a major step forward in simplifying digital payments for small-value transactions, delivering the convenience of wallet-like features with the efficiency of UPI. Recent developments like auto top-ups and increased transaction limits are game-changers for user experience. However, to truly unlock its full potential, improvements like interoperability and better transactional views are needed. Once these are addressed, UPI Lite can become a definitive tool for enhancing the everyday payment experiences of millions of Indians.
-The author is the CEO of the payments vertical at BharatPe. Views expressed are personal.
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