What is UPI Lite?

The National Payments Corporation of India (NPCI) is working on a new solution called UPI Lite that will allow small digital payments to be made without the need for an active internet connection. The RBI announced on January 5 that digital payments of up to ₹200 could be made without an internet connection.

How does it work?

UPI Lite will allow feature phone users to use their phones to connect to UPI networks and make digital payments directly from their bank accounts. There are currently two key solutions being evaluated. The first is a SIM Overlay, while the second is a software-provisioned solution that will use Over-the-Air (OTA) updates.

SIM Overlay is a technique that extends a phone’s SIM card’s capabilities, allowing payments and other services to be completed even when there is no data connection. On the other hand, OTA will deliver the solution straight to the device’s firmware.

Users will be required to create a 4-digit or a 6-digit pin, depending on the protocols implemented by their banks. Payments made via the SIM overlay technique will be routed through the NPCI’s UPI system to servers operated by the NPCI, and transactions will then take place over the standard UPI network. Instead of using the internet, the entire procedure will run over SMS networks.

How does it affect the Indian ecosystem?

Since the demonetisation of banknotes in 2016, India has experienced a surge in digital payments. According to a survey, tier-II and -III cities in India accounted for more than half of all online transactions in the quarter ending March 2021. In villages and towns, though, cash still reigns supreme.

According to an industry expert, an alternative, secure, low-cost mode of payments with a near-cash-like characteristic will be provided by small value offline mode for digital payments, improving consumer confidence as a preferred option for small retail payments. It has the potential to promote various creative retail payment use cases, such as tickets, product bundling and non-standardised pricing.

Given that feature phones still account for half of the market, this will improve payments in areas where internet penetration is low.

This is not the first time the NPCI has attempted to promote offline payments in rural areas. In 2012, it launched UPI-led offline payments over Unstructured Supplementary Service Data (USSD) networks. However, due to SMS charges, it failed to take off in a large way. 

According to NPCI data, the USSD system was used for transactions worth ₹1.21 lakh in 2021. Around 83 banks were using the USSD system as of December 2021.

If NPCI’s current experiments go as planned, about 350 million feature phone users in India will be able to make digital payments without the need for an internet connection.

DigiLocker is a Ministry of Electronics and Information Technology (MeitY) flagship initiative launched as part of the Digital India Programme. DigiLocker is a secure document repository created for the use of Indian citizens and businesses to store and retrieve important identifying documents easily. 

It also assists in maintaining a secure digital record of the original documents in the cloud and makes them available for various authentication reasons as requested by the user. The app is hosted per ISO 27001 standards to protect personal and financial information. The program also employs 256-bit SSL (Secure Socket Layer) certifications, which ensures that the data you supply to issue papers is secured. To get papers from the government or registered issuers, users must verify themselves using their Aadhaar data.

Compliance in the financial services industry largely comes in the form of KYC and AML procedures. For any financial services offerings, organisations need to process ‘Know Your Customer (KYC)’ as mandated by regulatory authorities. 

DigiLocker is used by regulated financial institutions (FIs) to conduct KYC verification before customer onboarding. DigiLocker KYC, as this process is known, involves integrating with DigiLocker to retrieve and verify KYC documents after obtaining the customer’s consent. A mobile native KYC journey is critical to reduce friction points as part of customer onboarding and prevent drop-offs.

How do financial institutions complete KYC using DigiLocker?

They partner with a ‘requestor’. A requestor is an authorised entity registered with the Digital Locker directory. It pulls out KYC documents such as Aadhaar & PAN from a user’s DigiLocker account, authenticates them, and uses them as Proofs of Identity & Address.

As per DigiLocker, it shall be used by the requester to –

(a) register on the Digital Locker directory;

(b) access documents uploaded by the subscriber on the Digital Locker portal; 

(c) use authorised gateway providers to access these documents stored across repositories; 

(d) access subscriber’s State or Central department or agency or body corporate issued documents based on the URI; and

(e) take consent from the subscriber to access documents available in the subscriber’s Digital Locker account 

4 Critical points to consider when looking for a ‘requestor’ for DigiLocker KYC

1. Compliance with DigiLocker norms

A DigiLocker-based KYC journey must follow certain rules as per the DigiLocker norms. As per UIDAI, MeiTY & other regulators, the following aspects must happen for a compliant DigiLocker flow:

• Customer must be mandatorily redirected to the DigiLocker page
• Customers must enter their Aadhaar details, OTP, and captcha themselves
• Take consent from the subscriber to access documents available in the subscriber’s Digital Locker account
• The verification must be performed by a requesting partner registered with DigiLocker

2.  Ability to create DigiLocker accounts on the fly

A customer may or may not have a pre-existing DigiLocker account. For such cases, your KYC partner must be able to create one for the customer on the go with their consent to be able to pull the relevant documents

3. Smooth customer experience 

It’s no news that Financial Institutions face heavy competition when acquiring customers. Hence, when choosing a KYC partner, thinking about your customer’s journey is basic hygiene. A smooth customer onboarding experience sure gives you an edge over your competitors.

4. Ease of integration

The requestor should have an API bus which Financial institutions can simply plug into to facilitate a DigiLocker KYC journey for their customers.

How can CARD91 help issue various card-based payment instruments using DigiLocker-based KYC?

CARD91 is a full-stack card issuance Technical Service Provider. We work closely with financial institutions such as Banks & NBFCs, and Fintechs to help them launch new-age card programs across card-based payment instruments such as prepaid cards, credit cards, forex cards etc. For issuing these various types of cards to the end customer, KYC is mandated by all financial institutions. We have been working closely with our banking partners to incorporate & promote mobile native DigiLocker-based KYC for a complete end-to-end digital experience for the customers to get their hands on these different types of card-based payment instruments. Some advantages of adopting a DigiLocker-based KYC methodology are as follows – 

1. An end-to-end mobile native digital journey for the end customers that helps reduce drop-offs and increase the number of cards issued.
2. A faster turnaround time for the card issuing entity (Banks) to validate and verify the customer and take approval decisions on issuing cards to these customers.
3. Get a full KYC limit of up to INR 2 lac per card per month in case of pre-paid instruments.
4. Help promote financial inclusion & digital payments for New to Credit and New to Bank customers who can apply for a pre-paid instrument with no or thin file financial history with financial institutions.

Bhushan Sawant, Director – Partnerships & Sales at CARD91

Interchange fees are a critical aspect of card processing and have a significant impact on the business’s bottom line. However, it is an important component of the revenue of the payments industry, affecting both merchants and consumers.

What are Interchange fees?

Interchange fees are the fees that a merchant’s bank pays to the card issuer’s bank for each transaction. These fees are a percentage of the transaction amount and are charged to the merchant’s bank every time a card is used for payment. The fees are set by the card networks, such as Visa and Mastercard, or by regulators in various countries, and are typically based on the type of card used (debit, credit, prepaid, multi-currency, rewards, etc.), the transaction amount, the location (domestic or overseas), and the merchant category code (MCC).

How do Interchange fees work?

When a customer uses a credit or debit card to make a purchase, the merchant’s acquiring bank pays an interchange fee to the card-issuing bank as compensation for processing the transaction. The acquiring bank then passes this fee onto the merchant as a “Merchant Discount Rate (MDR), typically as a percentage of the transaction amount. The acquiring bank has other revenue streams such as float income.

How does it work in India?

In India, interchange fees are primarily regulated by the Reserve Bank of India (RBI). The RBI periodically reviews and revises the interchange fee structure to promote transparency, competition, and efficiency in the payment system. The aim is to strike a balance between the interests of payment system participants, such as card issuers, acquirers, and merchants. The fees are typically a percentage of the transaction value or a fixed amount per transaction.
How do Interchange fees affect your business?

Interchange fees can have a significant impact on a merchant’s profitability as they decide the MDR charged by the acquiring bank to them. The MDR fees can range from 1% to 3% of the transaction amount, and for some high-risk industries, the fees can be even higher.

Understanding interchange fees, the float income of banks, and the resultant MDR is an important part of managing a successful business. By taking steps to optimize payment processing and manage fees, merchants can improve their profitability and provide better experiences to their customers.

At CARD91, we understand the dynamic relationship between Interchange fees and MDRs and help our issuance partners to monetise their transactions.

-Ayushi Jain, Manager- Sales & Partnerships, CARD91

India has experienced a remarkable evolution in its digital payment landscape in recent years. The swift proliferation of smartphones, internet connectivity, and government initiatives such as Digital India, Unified Payments Interface (UPI) NEFT/IMPS, Prepaid Cards/Wallets/Contactless Payments, e-RUPI, CBDC, AEPS, Open Banking/API Integration has significantly contributed to the expansion of digital payment methods throughout the nation. A strong tailwind to digital/contactless payments was provided by demonetisation and Covid-19, leading the way for a cashless economy and better tax compliance. This blog explores the latest digital payment trends reshaping India’s financial landscape.

Unified Payments Interface (UPI) Dominance

The Unified Payments Interface (UPI) has been a game-changer in the Indian payments industry. Launched in 2016 by the National Payments Corporation of India (NPCI), UPI enables users to link multiple bank accounts and execute real-time peer-to-peer transactions. UPI has witnessed exponential growth, with transaction volumes crossing the billion-mark monthly. Its success can be attributed to its simplicity, security, and interoperability across various payment apps.

IMPS/NEFT

IMPS and NEFT have revolutionised the way funds are transferred in India, providing individuals and businesses with fast, secure, and convenient payment options. Whether you need to send money urgently or make routine payments, these electronic funds transfer systems offer unparalleled accessibility and flexibility.

Prepaid Cards, wallets and Contactless Payments

Digital wallets and Prepaid cards have gained significant traction in India, allowing users to store funds digitally and make quick payments. The COVID-19 pandemic further accelerated the need for contactless transactions and contactless payments. NFC-enabled cards, QR code payments, and mobile payment solutions are increasingly prevalent, allowing consumers to make secure transactions without physical contact. Today, merchants are offering contactless payment options to provide their customers with a safer and more efficient checkout experience.

New Government Initiatives:

The Government of India has played a pivotal role in promoting digital payments through its flagship initiatives, such as Digital India, e-RUPI, CBDC and many more. Digital India aims to transform India into a digitally empowered society by promoting digital literacy and providing digital infrastructure.

o e-RUPI is a wholly cashless and no-contact electronic payment instrument that will be delivered to beneficiaries’ mobile devices (even mobile devices that are non-android or iOS) as either a QR code or an SMS-based e-voucher.

o CBDC is a digital currency issued by a central bank, rather than a commercial bank. Backed by blockchain technology, this central bank digital currency (CBDC) is an electronic version of the physical rupee, potentially representing a more secure and government-supported alternative to private digital currencies

AePS

India has witnessed rapid growth in biometric authentication for digital payments. The Aadhaar-enabled Payment System (AEPS) allows individuals to link their bank accounts with their unique Aadhaar identification number and make transactions using biometric verification. This technology has simplified payments for the underbanked population, making financial services more accessible and inclusive.

Integration of Artificial Intelligence (AI) and Machine Learning (ML)

Artificial Intelligence (AI) and Machine Learning (ML) are revolutionising the digital payments landscape in India. With AI-powered chatbots, payment service providers are enhancing customer support to address queries effectively. ML algorithms are leveraged to detect and prevent fraudulent activities, ensuring secure transactions. Moreover, personalised recommendations and targeted offers based on user behaviour are being utilised to drive customer engagement and loyalty.

Open Banking, driven by the Reserve Bank of India (RBI) guidelines, is a game-changer in the banking sector, allowing secure sharing of customer data between banks and fintech companies. Application Programming Interfaces (APIs) facilitate the seamless integration of various financial services, allowing customers to access multiple banking services through a single platform. This collaborative ecosystem encourages innovation and empowers customers with a variety of payment options.

As India moves towards a cashless economy, these trends will continue to shape the future of digital payments, driving financial inclusion and economic growth.

CARD91 is an API-led issuance Platform-as-a-Service company. It offers unparalleled technology infrastructure to banks, SMEs, corporates & fintech through its Switch and Card Management Solutions for Prepaid Cards, Multi-Currency Travel Cards and allied systems like Centralised System of Records (C-SOR) for prepaid cards, credit cards and Access Control systems (ACS)

Introduction:

Prepaid cards have experienced a remarkable transformation over the past few decades, emerging as a powerful tool in the financial landscape. Originally introduced as a convenient means for gifting and travel, these cards have evolved with advancements in technology to meet the changing consumer needs.

Prepaid Cards in India:

In India, prepaid cards have had a significant rise in popularity due to their numerous benefits. Initially embraced as a safe and convenient alternative to carrying cash, these cards quickly became prevalent in various sectors, from retail and transportation to online shopping. Their proliferation was further accelerated by the expansion of the country’s digital infrastructure.

One pivotal moment in the evolution of prepaid cards in India was the advent of e-commerce and the widespread adoption of mobile wallets. Leading banks and fintech companies integrated prepaid cards into their mobile applications, enabling users to make quick and secure digital transactions. This integration propelled prepaid cards into the forefront of India’s burgeoning digital payment ecosystem.

The Indian government also played a crucial role in promoting prepaid cards to drive financial inclusion. Millions of unbanked and underbanked individuals gained access to digital financial services by advocating for their adoption in government schemes and benefits disbursement. Prepaid cards became a gateway to the formal banking system, empowering individuals previously excluded from traditional financial services.

Prepaid Cards on the Global Stage:

The transformation of prepaid cards is not limited to India alone; it has reverberated globally. Prepaid cards have become an integral part of the financial landscape in many countries, catering to a diverse range of consumer needs. They have emerged as an alternative to traditional bank accounts for the unbanked and underbanked population, providing access to vital financial services.

The rapid growth of e-commerce and the increasing demand for seamless digital transactions have fueled the global adoption of prepaid cards. Payment processors and fintech companies have collaborated to issue virtual prepaid cards, making online shopping more accessible and secure for consumers worldwide. These cards have played a pivotal role in bridging the gap between individuals and the digital economy.

Another significant application of prepaid cards globally is in the travel industry. Prepaid travel cards have become the preferred choice for international travellers, offering favourable exchange rates and enhanced security. They provide a practical alternative to carrying foreign currency, enabling travellers to make hassle-free transactions.

Expanding Functionality and Rewards:

Today, prepaid cards have expanded their functionalities beyond basic transactions to address evolving consumer preferences. Many prepaid cards now incorporate rewards programs, cashback offers, and other loyalty benefits. These additional features aim to attract and retain users, fostering a sense of value and engagement.

Conclusion:

The evolution of prepaid cards in India and globally has been transformative, empowering financial inclusion and enabling seamless digital transactions.

As prepaid cards continue to adapt to changing consumer preferences and technological advancements, they are poised to play an increasingly significant role in shaping the future of the financial landscape. With their convenience, security, and versatile functionalities, prepaid cards will continue empowering individuals and businesses alike, fostering financial inclusion and contributing to the growth of the digital economy.

Card91 presents a diverse collection of prepaid cards, catering to both domestic and international transactions, accompanied by a convenient switch system. Our integrated solutions empower businesses and authorised dealers with effortless operations, facilitating a wide range of applications. To gain a deeper understanding of our innovative solution, please contact us at sales@card91.io. Our team will be delighted to assist you and explore how our offerings can cater to your specific requirements.

Let’s unlock new possibilities together!

-Written By Khushboo Bakhru, Partnership & Sales

Today, banks issue various prepaid instruments like prepaid cards, digital wallets, gift cards, fastags, etc. that are mandated to comply with certain regulations, as prescribed by the regulator in its master directions. At the same time, regulated entities carry out remittances, issue forex, international debit and international credit cards governed by tax laws. Any issuer providing multiple types of instruments, or partnering with multiple technology service providers is expected to follow these regulations and laws. The prepaid instrument regulations are meant to monitor/manage the level of prepaid instrument loading and usage at an individual customer level. The tax laws focus on collecting tax at source (TCS). These compliances demand a centralised repository that takes care of the following:

Uniquely identifying the customer and rolling up based on personally identifiable information (PII) sought from the customer at the time of onboarding.

Classifying customers based on their risk-profile categorisation.

Maintaining personalised limits at the customer level.

Controlling loading and usage at the issuer level.

Intimating the Bank / Regulated Entity on TCS applicability and rates.

This is precisely what the Centralised System of Records or C-SOR offers. A centralised System of Records (C-SOR) is a centrally managed repository that maintains customer-level records for a range of instruments issued by technology service providers (TSP) on behalf of the issuer. All customer actions undertaken by the TSP are sent to C-SOR for verification and validation. This means that only C-SOR-validated customer actions are treated as valid. Given below are a few scenarios that illustrate how the Centralised System of Records could be used by issuers in the context of various businesses they undertake.

Prepaid Cards: Bank and Non-bank PPI issuers issue prepaid cards through multiple TSPs. To maintain the balances and daily/monthly/yearly transactions allowed across transaction types and KYC types, be it full KYC or small PPI, the issuing entity should be employing a centralised system of records. For instance, a customer who was onboarded via both TSP1 and TSP2 will be identified as a single customer in the C-SOR system and the usage data should be managed accordingly.

Payments Bank: Payments Bank Savings Account balances plus balances contained in PPI or other internal wallets should not cross 2 Lakh INR at EOD. The differential should be swept into its partner Scheduled Commercial Bank’s deposit account. CSOR makes sure that the aggregate balance across applicable instruments doesn’t cross the prescribed limit.

LRS Limit Maintenance: Limits under the Liberalised Remittance Scheme (250,000 USD in a fiscal year) can be maintained by the C-SOR based on usage across instruments like Credit Cards, Debit Cards, Remittance Accounts and Forex Cards. The issuer can also be notified about usage that affects the TCS charged at a customer level.

CARD91 has built a robust centralised system of records as an API-led solution which lets issuers monitor its registered customers on a real-time basis. For more information, please reach out to sales@card91.io.

Written by Praveen Varghese, Product Manager, CARD91.

Tips for using Forex cards effectively for your overseas trip

Forex card is a type of prepaid card that can be loaded with foreign currency for use while travelling abroad. It is also known as travel cards as they are invaluable companions that help in simplifying and lightening your travel experiences. It is widely accepted and is one of the most cost-efficient and safe ways to pay for your expenses abroad.

Benefits of Forex cards:

A Forex card is one of the cost-effective ways of carrying and paying in foreign currency. It has replaced cash and travellers’ cheques to a major extent. The reasons are not far to gauge:

1. It’s cheaper and negates exchange rate risk. Most card issuers offer lesser spreads and at the same time, you can lock in the exchange rate when loading the card protecting you from foreign currency fluctuations during the travel.
2. It’s safer than other cards because it is a prepaid instrument and does not expose your savings bank account through a debit card or your credit limits through a Credit card.
3. Forex cards offer convenience, owing to wider acceptability, though not as much as debit and credit cards.
4. Most of the Forex cards also provide zero or lower transaction fees. Moreover, forex cards can be used to withdraw cash from ATMs in the local currency, at a fee.

Tips for using Forex card abroad:

1. Check exchange rates: Keep a check on the exchange rates before loading the card to get a favourable rate. Most players are open to negotiating these rates.

2. Keep looking for deals: Some issuer or other has deals on Forex cards, especially during travel and back-to-school seasons.

3. Issue more than one card: It’s a good idea to issue more than one card, preferably two, for the same load. The second card can kick in if the first card is lost or compromised.

4. ATM usage: Use ATMs affiliated with your card to avoid extra fees.

5. Avoid public Wi-Fi: To protect your data, one should avoid using public Wi-Fi for making online transactions or checking balances.

6. Online transactions payment: To avoid cross–currency charges use Forex Cards to pay for online transactions in stores abroad.

7. Dynamic currency conversion (DCC): DCC helps to make in-store credit card purchases in a foreign country using the currency of your own country. While DCC makes it easier for an international transaction, it also comes with an additional expense as it will include a markup fee and foreign transaction fees. So the customer should decline the option of DCC while making any retail store transaction.

8. Pay across the world with a single currency: Some Forex cards let you transact seamlessly wherever you travel without cross-currency charges. Load it once (in USD) and use it to pay for your expenses anywhere in the world.

CARD91 provides a multi-currency travel card designed for banks, distributors and agents helping with inventory management, including tracking, organising and overseeing all the multi-currency-related processes, providing a seamless digital onboarding. We make cross-border remittances faster, smoother, and more reliable through our SDKs.

Written by Srishti Sachdeva, Manager of Sales, CARD91.