Explained: Conversational UPI payments—the new way of making online transactions

Conversational payments facility will be made available in both smartphones and feature phones-based UPI channels, as per RBI. Image: Shutterstock

On August 10, along with major announcements such as an unchanged repo rate at 6.5 percent, Reserve Bank of India (RBI) Governor Shaktikanta Das said the central bank will bring into adoption the use of conversational payments on Unified Payments Interface (UPI) through artificial intelligence (AI). It will enable users to converse with AI-powered systems to make payments. 

According to the RBI announcement, the facility will be made available in both smartphones and feature phones-based UPI channels, facilitating the deepening of digital penetration in the country. Initially the feature will be in Hindi and English, and will subsequently be made available in more Indian languages. The RBI has instructed the National Payments Corporation of India (NPCI), the driving force behind UPI, to issue instructions to implement 'conversational payments' soon.

What are conversational payments?

Conversational payments are those payments which are processed during a chat/messaging conversation. The transaction which happens during a live chat, happens between two parties in which one is the chat operator and the other the payment provider.

Example: Suppose a user goes on a beauty/skincare brand’s website/app and types in a query for a product. The website/app will relay options best suited for the customer; when the customer chooses a product and needs to make a payment, the chat operator on the website/app will send a direct payment link to the user to make the payment real time without re-directing them to a UPI app.

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Benefits of conversational payments

Conversational payments result in a faster way of making payments online as the customer need not go to another link/app to make the payment. It can also be a safer mode of payment as the transaction will take place directly between the two parties involved without the intervention of any third party. These payments also enable the chat operator to stay with the customer till the end and take feedback which can help them enhance/improve their business process. 

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UPI-Lite

To further promote the utilisation of UPI Lite, an on-device wallet which allows feature phone users to access UPI networks and make digital payments straight from their bank accounts, the RBI is devising plans to introduce offline transactions using Near Field Communication (NFC) technology. This will not only address connectivity challenges by enabling retail digital payments in low or no internet/telecom zones, but also expedite transactions with minimal declines. To use UPI Lite, customers can add funds from their bank accounts to the app by authentication (AFA) or through UPI AutoPay, which needs to be registered online using an AFA. During the Monetary Policy Meet, the upper limit of a UPI Lite payment transaction was raised to Rs500 from Rs200, while the total limit of UPI Lite balance for an on-device wallet is Rs2,000 at any time.

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AI and the banking sector

Even before the RBI announcement on the use of AI to make conversational payments, other private/public sector banks in India have started or are planning to begin the use of AI to further improve a user’s banking experience. Banks are using AI in the form of chatbots and are partnering with fintech firms to include new-age technology in banking services. For example, HDFC Bank has its chatbot Eva which provides customers and non-customers with information about the lender’s banking services. In its annual report for FY23, the State Bank of India said it will enhance the use of business analytics, AI and machine learning in decision-making and operations. Axis Bank also said it is looking at using ChatGPT’s enterprise version for enhancing communication services with customers.