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The Reserve Bank of India (RBI) on Wednesday said it has decided to launch a UPI-based payment product for feature phone users. Feature phones are basic phones, which typically provide voice calling and text messaging functionalities. Some of these devices also have basic multimedia and internet options.

Adhil Shetty, CEO of BankBazaar.com, said: "UPI has become the largest retail payment mechanism by volume in the country. Unsurprisingly, the RBI is trying to figure out ways to expand the reach of this system as well as to make the backend processes supporting UPI simpler for the banks. Currently, UPI requires a smartphone with a working internet connection to send money. While BHIM does allow basic payment services without internet, it hasn’t taken off in a big way. So the RBI has been looking at ways to enable UPI on feature phones as well as smartphones when internet services aren’t available for quite some time now. This move will increase digital penetration of financial services and help a large segment of people without access to smartphones or reliable internet services to transact digitally."

Adding to it, Amit Kumar, Founder, GalaxyCard, FinTech startup, "It is a welcome move to see regulation coming in on the fee, especially for UPI. It is however important that business models are not affected in terms of their profitability otherwise the growth of digital transactions may take a severe hit. The move will prevent bad actors from misusing customer's trust."

Currently, feature phone users have limited access to innovative payment products. Although feature phones have NUUP (National Unified USSD Platform) as an option for availing basic payment services using the shortcode of *99#, the same has not picked up. To deepen financial penetration, it is important to bring feature phone users into mainstream digital payments. In the first cohort of RBI Regulatory Sandbox, some innovators had successfully demonstrated their solutions for feature phone payments, under the theme of ‘Retail Payments’. These products, coupled with other complementary solutions, will facilitate UPI-based digital payment solutions on feature phones to promote wider digitisation, as per the statement.

RBI further wants to simplify the process flow for small value transactions over UPI. The apex bank wants to enable small value transactions through an “On-device" wallet in UPI app which will conserve banks’ system resources, without any change in the transaction experience for the user.

"Coupled with a simplified process flow, especially for low-value transactions, to reduce transaction failures due to connectivity issues could mean a much wider adoption of UPI as the de facto cash alternative. People are increasingly looking at UPI as a simpler payment solution not just for retail requirements but also for regular recurring investments," said Shetty. "Today, UPI platforms facilitate investing in everything from mutual funds to term and health insurance to even cryptocurrencies. The simplicity and security of UPI transactions are leading to higher adoption, and the RBI is doing its bit to support this by facilitating its use while investing in Retail Direct Scheme and IPO applications. The move reduces barriers to investing, and is expected to encourage better participation in such schemes," Shetty added.

As per the RBI statement, "UPI is the single largest retail payment system in the country in terms of volume of transactions (14 crore transactions per day, October 2021). One of the initial objectives of UPI was to replace cash for low value transactions. Transaction data analysis shows that 50% of transactions through UPI were below 200, indicating its success. These low value transactions, however, utilise significant system capacity and resources, at times leading to customer inconvenience due to transaction failures because of issues related to connectivity."

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