The reports suggest that the National Payments Corp. of India (NPCI) is testing a solution that allows Unified Payments Interface (UPI)-based digital payments without active internet connection.

Reports suggest that, UPI Lite is used to enable digital payments under Rs.200 in rural areas at first.

The Reserve Bank of India (RBI), recently, allowed offline digital payments of Rs.200 without internet connections. UPI Lite enables feature phone users to make digital payments from bank accounts. Government is working on two solutions currently. The first is a SIM overlay, and the other is a software-provisioned solution that leverages over-the-air (OTA) updates.

SIM Overlay is a technology which enlarges the functionalities of a phone’s SIM card by allowing payments and other services to be carried out even without data availability. OTA, on the other hand, provides the solution delivered straight to the device’s firmware.

According to the reports, the OTA solution would be parallel to the snake game on erstwhile Nokia feature phones, which gets updates over the networks without 3G or 4G networks. However, solution would be different from how it is conventionally done and the technology in play here is patent pending.

The transaction on the SIM connection uses a telecom network. The intersection is provided inside the phone through telecom network. Users can get the features on their phone by visiting a store. A Virtual Payment Address (VPA), called the UPI ID, is created through SMS. Once the UPI ID is created, the payer has to select the contact to whom a payment needs to be made. If the contact, too, has a UPI ID, the payer has to click on the name and enter the amount and send the money, as per the reports.

Reports suggests that users have to set up a four-digit or six-digit pin as per the protocols of the users’ bank. Payments made on the SIM overlay method will go to servers managed by the NPCI under the UPI system, and transactions occur over the regular UPI network from there. The entire process run on SMS networks instead of the internet.

Monish Shah, partner, Deloitte India says, “small value offline mode for digital payments will provide an alternative, secure, low-cost mode of payments with a near-cash-type characteristic, thereby increasing consumer confidence as a preferred mode for small retail payments. It can provide impetus to several innovative use cases in terms of retail payments, such as ticketing, bundling of products, as well as non-standardized pricing.”