In today's Finshots we see how the RBI framework for offline retail payments could affect our lives


The Story

Here’s a stunning fact for you. According to official government data, there are still some 25,000 villages in the country that don’t have access to the internet. And in Arunachal Pradesh for instance, there are still around 2223 villages that don’t have mobile or internet connectivity. It’s quite remarkable and it also means, that financial inclusion will be a distant dream for people living in these parts of the country.

They’ll never get to use digital banking. They’ll never have the chance to access UPI. And they’ll never be able to transact seamlessly if they don’t have ready cash at their disposal. And considering commerce is the bedrock of any community, the lack of payment infrastructure may be a sore point for people living in these areas.

But then a ray of hope. In a bid to expedite progress on this front, the RBI on Monday unveiled a new framework that cleared the path for enabling offline digital payment. That means sending money via your favourite payment apps, without an active internet connection.

Yeah, that’s right. We are talking about offline payment solutions.

According to current guidelines, you can do this subject to a few limits. For starters, you only send and receive ₹200 over a single transaction. And you’ll also have to contend with a spending limit of about ₹2000 at any given point in time. But perhaps the biggest bottleneck is that the limit can only be reset once again in the online mode with an additional factor authentication. So if you really have no access to the internet for long periods of time, this can be a bit of a bummer. However, having said that, it’s still progress and there’s no doubt that this will help more people to go digital.

More importantly, it could also help people who have a patchy internet connection. If you’re stuck in a hotel without network connectivity, this could come in extremely handy. And the RBI has been working pretty hard behind the scenes to make it happen. Just last December the regulator expressed a desire to retool UPI for use on feature phones — which is important considering ~44 crore people still use feature phones. And they’ve also been conducting pilots in a bid to see how prospective solutions would work in real-life settings.

But how will this work? How does one enable offline transactions without access to the internet?

Well, there are multiple companies working in conjunction with the RBI to facilitate offline payments. Take for instance VISA. A few months ago, VISA said that it would introduce special cards that would facilitate transactions in areas with little or no connectivity. These cards would likely act like wallets with a pre-loaded amount. If you have the balance, you can transfer it over to another card without internet connectivity. However, if you don’t have the money, then the transaction won’t go through.

Elsewhere, NPCI (National Payment Corporation of India) has dabbled with text messages to facilitate payments. If you have a feature phone, you could simply send a message with a specified code and transfer money if you have USSD mobile banking services enabled. Side note — It’s not really taken off in a big way.

Then there are startups using new methods to help people transact without internet connectivity. One company uses soundwaves or NFC to facilitate payments without the need for the internet. So yeah, it’s likely that you will begin seeing many companies try to make a dent in this space as we move on and we may also see incumbents like Google Pay and PhonePe introduce this feature.

Maybe this is the beginning of a new offline revolution — the kind we saw when NPCI introduced the ubiquitous UPI.

Maybe this is what we needed to bring everyone into the digital payments fold.

Until then…

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