Digital payments supervising body National Payments Corporation of India (NPCI) is running a pilot project on proximity-based payment systems with three startups, The Economic Times reported, citing two persons in the know.
NPCI has selected PhonePe, Tone Tag and Ultra Cash to run the pilot, the report added.
Proximity payments allows users to make transactions without physically interacting with terminals. This reduces the chance of manual as the user does not have to type anything. It also cuts down the costs for merchants which will lead more retailers to adopt it, the ET report said.
NPCI is running the pilot within a closed group at cafeterias and office canteens, one of the persons mentioned above told ET.
“Once the stability and security of these processes are ensured, they could be tried at a larger scale as well before going live. It is yet at a very early stage and will need time before going live,” the person added.
To operate the tech, a merchant will have to use his or her smartphone or mobile PoS to generate a voucher to receive payment. Once that is done, the customer will identify the merchant via his phone to initiate a payment. In the background, UPI will be used by NPCI to settle the transactions between the banks, the ET report said.
UPI is a real-time payments system developed by NPCI that enables digital transactions between banks.
Competition in India's payments space has intensified over the past few months.
In March, Flipkart invested $80 million into its payments arm, PhonePe.
In February, digital wallet Paytm’s founder Vijay Shekhar Sharma had insinuated that NPCI had bent the rules to the advantage of a payments feature rolled out by WhatsApp in beta. In the same month, Facebook-owned WhatsApp had rolled out its payments service in beta mode based on UPI.
Tech giant Google, which launched its payments app Tez in September last year, introduced a chat option in March to take on WhatsApp.
In January, retailer Amazon India launched doorstep services to allow customers top-up their Amazon Pay wallets with cash from their homes. The new feature will be in addition to the online transfer of funds from bank accounts and through credit and debit cards.
In February, Amazon integrated UPI into its mobile interfaces. Users can make transactions of up to Rs 10,000 on its mobile application and mobile web interface.
Last year, market research firm IDC had said that digital payments in India would overtake cash and non-digital payments by 2022. “The payment industry in India is going through gigantic changes. Over the last few years, the tremendous growth in the digital payment space has sparked a passionate debate across the industry. The next several years will see a transformation of how consumers, businesses and the government move money,” said IDC.