AI in UPI Payments: Is Your Money in Danger?

So, to give a humongous boost to the Digital India scheme, the Reserve Bank of India has proposed to bring forth conversational payments in UPI. This means that for certain payments in your day-to-day life, say, an electricity bill or a yummy burger, all you would need is to give the command to the UPI app and Voila! Your payment is made. Doesn't that sound amazing?

This news was released along with the announcement of RBI raising the offline mode transaction limit from ₹200 to ₹500. Yup, it's time for a treat from RBI's side as they are bringing one great news after another! So, for small-value digital payments, the limit in Unified Payments Interface, popularly called UPI, was ₹200. Now, RBI has increased this limit allowing Indian citizens to transact more via digital platforms even without an internet connection.

This hike in offline mode transaction amount would assist in increasing the citizens' involvement from rural and semi-rural areas in digital payments. That was the main motive of RBI while launching this initiative in January 2022. The initiative seems to be working well, and the result is clear from the splendid hike from 2021 to the last months of 2022. Check out the infographic below displaying the total number of digital transactions in India. ⬇️

See the tremendous hike of 5,554 crore people from 2021 to 9,192 crore people by 2023? That’s how many people are performing digital transactions annually.

Mera Desh Aage Badh Raha Hai… 🎶

What is “Conversational Payments” in UPI? How Will it Work?

Increasing the small-value transaction limit was not all! RBI is in no mood to take a break, as the regulatory body is preparing plans to introduce AI to UPI payments. As RBI governor Shaktikanta Das said, "As AI is becoming increasingly integrated into the digital economy, conversational instructions hold immense potential in enhancing ease of use, and consequently reach, of the UPI system. It is, therefore, proposed to launch an innovative payment mode viz., 'Conversational Payments' on UPI" (sic).

It's not a surprise that more than half of the population today is using AI tools and platforms to get several tasks done. (But, don't worry, your Insider articles are still safe from AI infiltration. No harsh feelings, super entity! 🤷‍♂️) As per the Digital India scheme’s vision, creating an innovative digital ecosystem is what RBI is focusing on. People are already becoming more and more habitual with the usage of AI tools and features. Hence, the timing for RBI planning an AI-assisted feature couldn't be more perfect.

As per the resources, the "conversational payments" feature in UPI would allow users to give voice commands to an AI-powered assistant to make payments. No need to go through the trouble of scanning QR codes; just let voice automation take the lead for ease in life.

For starters, this feature would be available in both smartphones and feature phones. The feature would allow users to proceed with digital transactions securely. Since AI has certain biases, especially in regards to maintaining data privacy. Hopefully, similar to the ongoing digital transactions, the AI-assisted "conversational payments" feature too would provide users with a safe platform along with easy access.

National Payment Corporation of India (NPCI) would also play a major role in this initiative as they are the creators of UPI. As an RBI subsidiary, NPCI would soon receive the required instructions from the regulator to adopt AI on several UPI apps. By June 2023, the UPI platform had around 458 banks live, helping boost the "Digital India" and the "Make In India" scheme.

As for the working of the AI feature in UPI, everything would be managed via a chatbot. The AI-assisted chatbot would help users with a direct payment link or generate a QR code. The payment mechanism, from the generation of the link to the payment going forward, would take place while the user is communicating with the bot. Swift, effortless, and safe!

Other RBI Efforts to Boost Digital India

As I mentioned above, RBI is busy at work in taking India to the top of the most digitalised nations in the world. Apart from AI’s association and offline mode advancements, many other plans are ongoing or already in place. Some of the recent efforts by RBI for digitalising India are:

Upgrading UPI-Lite

An on-device wallet introduced in September 2022, UPI-lite is a mini version of UPI that allows a maximum balance of ₹2,000 in its wallet. The payments on UPI-lite do not require UPI Pin. At present, UPI-Lite boasts about 10 million monthly transactions. RBI is planning on introducing NFC tech-enabled payments for UPI-Lite to further speed up small-value transactions.

Near Field Communication (NFC) technology enables communication between two electronic devices at a distance of 4 cm or less. It will help in making transactions complete in much less time with fewer chances of declines.

Digital Rupee

India's digital currency, Digital Rupee, was launched in November 2022 with the establishment of the pilot launch of Central Bank Digital Currency (CBDC). Simply put, Digital Rupee (e₹) is the digital version of India's currency, Rupee (₹). Several banks like HDFC Bank, Bank of India, Bank of Baroda, Yes Bank, IDFC Bank, etc. were chosen to participate in establishing the Digital Rupee.

Retail and wholesale players can accept the e₹ as long as they have signed up for it.

The Bottom Line

In short, paying for stuff is about to get more user-friendly or, should I say, AI-friendly. The timeline for the “conversational payments” feature to get live is yet unclear, but it would be some time soon, as per RBI. India is already showing its elevation in being a digitalised nation via UPI, but mingling AI with people’s money can be risky. Will the data privacy and security that RBI is promising people with this upcoming feature meet expectations or cause further trouble is the big question.