In a move to make United Payments Interface (UPI) more user-friendly and to increase its popularity, the Reserve Bank of India (RBI) has proposed incorporating Artificial Intelligence-powered conversational features on UPI, to enable digital payments through voice commands.

The RBI has also announced plans to enhance the transaction limit for small-value digital payments in offline mode from ₹200 to ₹500 with the overall limit being retained at ₹2,000 per payment instrument to contain the risks associated with relaxation of two-factor authentication.

“As AI is becoming increasingly integrated into the digital economy, conversational instructions hold immense potential in enhancing ease of use, and consequently reach, of the UPI system. It is, therefore, proposed to launch an innovative payment mode viz., ‘Conversational Payments’ on UPI,” RBI Governor Shaktikanta Das announced on Thursday.

Explained | Daily limit on UPI transactions 

This feature will enable users to engage in a conversation with an AI-powered system to “initiate and complete transactions in a safe and secure environment”. 

“UPI has significantly contributed to positioning India as the leader of digital payments. The enhancements proposed by the central bank will further accelerate the adoption of UPI,” said Mandar Agashe, founder & MD, Sarvatra Technologies.

“While payments through QR code are easy for everyone, the introduction of ‘Conversational Payments’ on UPI has the potential to take ease of payments to the next level. Those who find it difficult to navigate through a mobile application for making digital payments or want to save time, will now be able to execute UPI transactions with ease,” he added. 

This channel will be made available in both smartphone- and feature phone-based UPI channels, thereby helping in the deepening of digital payments’ penetration in the country. 

The facility will initially be available in Hindi and English and will subsequently be made available in more Indian languages. The RBI will soon issue instructions to its subsidiary, the National Payment Corporation of India (NPCI), which had developed the UPI system and now operates it.

Rahul Jain, chief financial officer (CFO), NTT DATA Payment Services India said, “ This not only highlights the potential for ‘Make-in-India’ solutions to gain global recognition, particularly in technology-driven nations where AI is pervasive but also highlights India’s pioneering role in the digital payments’ domain.”

He said Conversational Payments within the UPI framework would revolutionise the way users conduct transactions, harnessing the capabilities of advanced technologies such as AI. “It’s plausible that the payment process will involve leveraging a Chatbot. The transaction itself will unfold in real-time conversation between two participants: a chat operator and the payment facilitator,” he said.

“The chatbot will play a pivotal role by providing the user with a direct payment link or QR code. This mechanism will enable the user to execute the payment seamlessly during the ongoing conversation,” Mr. Jain added.

“This AI-driven model ensures swift and secure transactions, safeguarding users within a consolidated environment. This will further enhance the user experience, offering a seamless, transparent, and highly convenient payment solution,” he added.

NFC tech-enabled payments

In yet another improvement to the UPI ecosystem and to promote UPI-Lite, an on-device wallet introduced in September 2022, the RBI is also planning to facilitate offline transaction using Near Field Communication (NFC) technology.

NFC is a set of communication protocols that enables communication between two electronic devices over a distance of 4 cm or less. 

“This feature will not only enable retail digital payments in situations where internet or telecom connectivity is weak or not available, it will also ensure speed with minimal transaction declines,” the RBI said adding it would soon issue instructions to NPCI on this front too.

UPI-Lite was introduced to increase the speed of small-value transactions on UPI and to optimise processing resources for banks, thereby reducing transaction failures. This product has now gained traction and currently records more than 10 million transactions a month. The facility for offline transaction is expected to increase the number of transactions manifold.

Adelia Castelino, co-founder and MD, In-Solutions Global Ltd said, “The introduction of offline payments in UPI through NFC technology via UPI Lite will be a promising development. Offline payments can be particularly useful in situations where internet connectivity might be limited, ensuring that users can still make transactions seamlessly.”

“Introducing NFC technology for offline payments as proposed by the RBI Governor promises faster low-value transactions and could transform payment ecosystems,” she added.

Another important announcement was regarding enhancing the transaction limit for small-value digital payments in offline mode from ₹200 to ₹500.

Such small-value digital payments are conducted in offline mode using National Common Mobility Card (NCMC) and UPI Lite. It does not have two-factor authentication and these channels enable faster, reliable, and contactless mode of payments for everyday small-value payments, transit payments etc. There have been demands for enhancing the limits and the move could encourage wider adoption of this mode of payment. 

“The RBI’s proposal to enhance the transaction limit of small-value offline digital payments to ₹500 further enhances ease of use of UPI and deepens digital payment ecosystem in India,” said Aryaman Vir, chief executive officer, Aurum WiseX.