India is introducing methods for voice-based and offline digital payments to develop the nation's quickly expanding digital infrastructure and bridge a gaping rural-urban divide. In order to develop India's digital infrastructure and bring the nation with the greatest number of people online, Prime Minister Narendra Modi has made it a priority to watch the progress of the Universal Payments Interface, a digital payments system. Since UPI's inception in 2016, the number of individuals using it to pay for goods and services and send money immediately has increased to roughly 350 million. In July, the system registered approximately 10 billion transactions, more than double that of the corresponding month in 2016. But its penetration into India’s poorer rural areas has been hampered by sparse internet access and lower levels of literacy outside urban areas.
To address this gap, the Reserve Bank of India this month announced a plan for “conversational” payments. UPI users will be able to make verbal transfer instructions on their phones which will be processed using AI-based speech recognition to initiate transactions. The service, which will use open-source AI language tools developed by the Indian Institute of Technology Madras, will initially be available in English and Hindi before being broadened to other languages.
Users will also be able to make transactions without the internet by using “near field communication” technology, a system widespread in contactless card transactions that uses a connection between two close-by phones. This will “enable retail digital payments in situations where internet [or] telecom connectivity is weak or not available,” the RBI said. Dilip Asbe, head of the National Payments Corporation of India, the state-backed entity which manages UPI, said the measures which will be introduced in the coming months will facilitate digital payments outside India’s largest cities, where growth has been concentrated.
“What they do is help us to expand and create a new use case to reach out to more users and more merchants.” Modi’s government has promoted cashless payments as part of a digital infrastructure suite, known as the India Stack, designed to bring the country’s vast and unregulated cash-based economy into the formal financial system. The UPI system has also been central to Modi’s pitch to attract foreign investment, with companies including Google and Walmart-owned PhonePe building popular payment apps. Countries such as Singapore and the United Arab Emirates have also integrated elements of India’s payments infrastructure with their own.
Vijay Shekhar Sharma, the founder of Indian payments group Paytm, said the offline function for UPI could be a “game changer”. The plan faces considerable headwinds, however. Analysts warn that access to digital tools remains starkly unequal. Less than half of Indians use the internet, according to the IMF, while just 15 per cent of rural households have internet access. India is also home to the world’s largest population of illiterate adults, at about 300mn people.