Relevance: GS-3: Indian Economy, mobilization of resources, growth, development and employment.

Key phrases: Offline digital payment, RBI, E-RUPI, AFA, tone tag, Bluetooth,

Why in News?

• The Reserve Bank of India (RBI) has come out with the framework for facilitating small-value digital payments in offline mode, a move that would promote digital payments in semi-urban and rural areas.

What is Offline Digital Payment?

• An offline digital payment means a transaction that does not require internet or telecom connectivity.
• Under the offline mode, payments can be carried out face-to-face (proximity mode) using any channel or instrument like cards, wallets, and mobile devices.
• These transactions will not require an additional factor of authentication (AFA), the Reserve Bank of India said, adding that since the transactions are offline, alerts (by way of SMS and/or e-mail) will be received by the customer

Why there is a need of offline digital Transaction?

• Today, the active base of digital payment users is around 120 to 150 million customers but we need solutions for areas where data or internet connectivity is not available, whether it be in metros or rural areas. The need to offline digital transaction is due to following reasons:
  • Low internet connectivity: Vast area of India still facing problem of internet connectivity so in these area it Encourage customers to opt for digital payments even in these places internet connectivity is poor.
  • Reduced the chance of fraud: Transactions are subject to a limit of Rs 200 per transaction and an overall limit of Rs 2,000 for all transactions until the balance in the account is replenished. Balance replenishment can only occur in an online mode. So chances of online fraud reduces.
  • Easy to transaction: These transactions will not require an additional factor of authentication (AFA).i.e. No OTP.
  • Secure and seamless solution makes the payment market robust: Offline payments are a welcome addition as it makes digital payments more robust. When it comes to security, the same proven technology is used as for tokenized card payments where the offline transactions are signed digitally from a secure element in the payment app. The transaction is transferred to the recipient with any type of proximity-based interaction, for example QR or BLE, to be verified in an offline-mode with an application running either on a mobile phone or a PC.

  

Offline Digital payment system in India:

• In recent months, a number of payment players have been working on offline payment solutions.
  • e-RUPI: The government’s latest digital payments offering, e-RUPI, however, permits offline transactions, which can be carried out on feature phones and can be shared through an SMS or QR Code.
  • Offline chip-based card: Visa had, in August 2021, announced that it is driving a Proof of Concept for offline digital payments along with Yes Bank and Axis Bank. Users can transact using chip-based Visa debit, credit and prepaid cards, even in places with low or no internet connectivity. The chip will hold a stored value of a daily spend limit of ₹2,000 and have a per transaction limit of ₹200, and would be akin to having a wallet with a preloaded amount.
  • ToneTag is an offline, feature phone-based payment solution for peer-to-merchant transactions over ‘sound medium’ by establishing a secure channel for data transfer over interactive voice response (IVR) between devices and enables contactless payment even without internet.
  • City Cash : A company called Tap Smart Data from Mumbai is bringing its product City Cash, a prepaid card that runs on NFC technology. It facilitates offline person-to-merchant (P2M) payments. Customers can use it as a travel pass for buses, it can also be used as a wallet for payment to the merchant.
  • Payse: Similarly, Delhi-based Nucleus Software Exports Limited has started testing its product PaySe. It will also be an online and offline payment card. In this too, NFC will be used for payment. It will be like a digital mobile wallet that will work in online and offline modes.

Source: The Hindu

Mains Question:

Q. “The Reserve Bank of India (RBI) has come out with the framework for facilitating small-value digital payments in offline mode”. In light of this statement what is Offline digital transaction? How it would promote digital payments in semi-urban and rural areas? Illustrate.