UPI payments via NFC

The RBI Governor made a reference to UPI payments via NFC in his statement on 10 Aug 2023. This has been covered widely since yesterday:


And because everyone is talking about it, maybe we could explore if NFC can work for PPI payments as well. To begin with, here is an extract of the RBI Governer’s statement:

Conversational Payments and Off-line Capability on UPI; Enhancement in Transaction Limit of Small Value Off-line Digital Payments

  1. With the objective of harnessing new technologies for enhancing the digital payments experience for users, it is proposed to (i) enable “Conversational Payments” on UPI, which will enable users to engage in conversation with AI-powered systems to make payments; (ii) introduce offline payments on UPI using Near Field Communication (NFC) technology through ‘UPI-Lite’ on-device wallet; and (iii) enhance the transaction limit for small value digital payments in off-line mode from ₹200 to ₹500 within the overall limit of ₹2000 per payment instrument. These initiatives will further deepen the reach and use of digital payments in the country.

Can this be extended to PPI as well?

The PPI regulations already define the 2FA requirement for PPI. Here is an extract from the PPI FAQs:

  1. Is there a requirement of AFA / 2FA for transactions undertaken using a PPI?

Ans. All wallet transactions involving debit to the wallet, including cash withdrawal transactions, are permitted only by validation through a 2FA. The AFA requirements for PPI Cards (physical or virtual) shall be same as required for debit cards. 2FA / AFA is not mandatory for PPIs issued under PPI-MTS and Gift PPIs.

What is the 2FA requirement for debit cards?

Here is an extract from the card transaction FAQs:

  1. How are the transactions carried out through cards protected against fraudulent usage?

Ans: All CP and CNP transactions on cards issued in India are secured with AFA. This AFA can be in any form and few commonly used forms are PIN, dynamic one-time password (OTP), static code, etc. The requirement of AFA is not mandatory for transactions where outflow of foreign exchange is contemplated. Similarly, in case of CP transactions (except ATM transactions) using NFC contactless technology, transactions for a maximum value of ₹5,000 per transaction are allowed to be undertaken without AFA requirement, subject to adherence to EMV standards.

So, like debit cards, PPI payments can be made via NFC for transactions upto Rs. 5,000/-
*CP = Card Present

Since UPI handles can be created for PPI wallets. You might even be curious to explore the idea of using PPI funds via UPI NFC. The 10 Aug 2023 statement from RBI covers this flow once launched for UPI.