UPI Tap and Pay lets users make payments without entering a UPI ID or scanning a QR code, using an NFC-enabled smartphone and compatible point-of-sale (POS) terminal.
The feature was launched on the second day of the Global Fintech Fest in Mumbai. RBI Governor Sanjay Malhotra inaugurated the new payment facility.
UPI Tap and Pay makes payments easier
Under the new system, users can make a payment by simply unlocking their NFC-enabled smartphone and tapping it on an NFC-enabled POS terminal.
Users do not need to open their UPI app for the payment. Once the phone is unlocked and brought close to the compatible POS machine, the amount entered on the terminal can be transferred through the payment system.
The National Payments Corporation of India (NPCI), which operates UPI, said the tap and pay feature will work even in areas with low or no internet connectivity.
This could make UPI payments more convenient in situations where users may not want to enter payment details or scan a QR code.
UPI Tap and Pay works across UPI apps
NPCI is the primary organisation responsible for managing retail payment and settlement systems in India. It was established by the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA).
The new feature is being introduced as a standard UPI payment option. This means users of different UPI apps can potentially use the tap-based payment method instead of depending on a particular app’s separate feature.
Apps such as PhonePe, Google Pay, BHIM and Paytm are among the major platforms used for UPI payments in India. The new standard aims to make tap-based payments available across the wider UPI ecosystem.
NFC, or Near Field Communication, allows compatible devices to exchange information when they are brought close together.
The technology is already used for contactless payments through supported smartphones and payment terminals.
Tap-based payments are already available
Tap and pay is not a completely new concept in digital payments. Smartphones and apps such as Google Pay already support similar contactless payment features.
Apple Pay also offers tap-based payments in markets where the service is available. However, UPI’s new facility brings the technology into the wider UPI payment framework in India.
The main change for UPI users is that the payment process can now be based on tapping a compatible smartphone on a compatible POS terminal, rather than entering a UPI ID or scanning a QR code.
The availability of the feature will depend on whether the user’s smartphone and the POS terminal support NFC and the required UPI payment functionality.
SEBI launches Demat 2.0 pilot project
Separately, the Global Fintech Fest also saw the launch of Demat 2.0, a pilot project by the Securities and Exchange Board of India (SEBI) for tokenisation of corporate bonds.
The announcement was made jointly by RBI Governor Sanjay Malhotra and SEBI Chairman Tuhin Kant Pandey at the event.
Demat 2.0 is linked to the RBI’s wholesale central bank digital currency (CBDC) through the RBI’s Unified Market Interface (UMI). The pilot is designed to support faster transactions involving tokenised corporate bonds.
Tokenisation involves converting ownership records of traditional corporate bonds into digital tokens using blockchain technology.
It is a technology-based method of issuing, selling and managing existing bonds rather than a new investment product.
The two announcements highlight the growing use of digital technology in India’s payment and financial markets, with UPI focusing on easier retail payments and Demat 2.0 exploring technology-based transactions in corporate bonds.