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Offline Digital Payments: Meaning, Advantages, How it Works and more

offline digital payments

The Reserve Bank of India (RBI) released a framework on January 3, 2022, enabling small-value offline digital payments among Indian citizens. Ideally, RBI introduced this concept to increase digital payment penetration in semi-urban or rural areas with limited or no internet or telecommunications connectivity. It believes that only with the active participation of its rural population can India achieve its goal of becoming a cash-lite or cashless economy.

This blog explores in depth the fundamental concept of offline digital payments, its advantages, the reasons for its introduction, and its future contribution.

What are Offline Digital Payments?

While offline digital payments appear to be a simple concept, different interpretations of its definition have resulted in a variety of solutions. It may, for instance, refer to a transaction that is recorded offline but settled at a later time. Certain wallet transaction types would fall under this definition. From a prerequisite’s standpoint, it can refer to a transaction between users that occurs without an internet connection. This includes transactions involving a non-Internet-based telecom service, such as USSD. Finally, purists may define offline digital payments as those that can take place without a connection to an external power source or ledger4. These transactions involve the use of specialised hardware devices and stored-value cards. Offline digital payments refer, more simply, to the capacity to complete a payment transaction without infrastructure or backend dependencies. From this perspective, enabling offline digital payment solutions in the Indian context has several benefits.

Advantages of Offline Digital Payments  

The most significant advantage of the new framework is that it will reduce the Indian economy’s reliance on physical cash notes and accelerate its transition to a cashless economy, saving money on printing and other related activities. It’s a technological innovation because it enables customers in remote rural or suburban areas with poor internet or telecom connectivity to use digital modes of payment. This is beneficial for them, as there are few ATMs and banks in these areas, and filling ATMs with cash can be difficult for a variety of reasons.

Because it is a digital mode of payment, and every transaction is recorded by the issuer/acquirer, it will reduce tax evasion by merchants even if they do not issue bills, which is a common practice in such regions. This action has the potential to increase the collection of Goods and Services Tax (GST) from these regions.

offline digital payments

How do Offline Digital Payments work

They relied heavily on three technologies to enable offline digital payments.

1. NFC (Near Field Communication)

  • An umbrella term for a variety of short-range wireless technologies that:
  • To initiate a connection, it should ideally work only nearby (4cm or less).
  • Users can use a touch screen to make secure transactions, exchange digital content, and connect two electronic devices.
  • Ensures a transaction experience that is comparable to today’s contactless card payment service.

2. Sound wave technology

  • A very viable alternative to digital payment methods.
  • Removes the need for a smartphone or the internet to complete transactions.
  • Uses sound methods to conduct transactions at the point of sale between customers and merchants/service providers.
  • Assures a secure and encrypted process, lowering the risk of transaction failure.
  • TongTang was created using sound wave technology.

3. Voice/menu-based transaction system

  • To begin UPI payments, use a voice or menu-based user interface.
  • Despite being based on an old concept, the interestingly overlaid menu makes it simple to use.
  • Allows users to perform various banking tasks using voice commands.
  • Removes the requirement for a smartphone to use offline digital payment services.
  • BHIM Voice is a voice/menu-based technology-based product.

RBI allows Offline Digital Payments

You should also be aware of the following aspects of the RBI’s framework:

  • To enable low-value digital transactions, a pilot scheme was used to develop an offline digital payment framework.  
  • Payment System Participants (PSPs), Payment System Operators (PSOs), acquirers, and issuers are required to ensure compliance with the framework and related instructions.   
  • It is also issued under Section 10 (2) of the Payment and Settlement Systems Act of 2007.   
  • The alerts or notifications for their offline transactions may arrive with a time lag.   
  • AFA, or Additional Factor of Authentication, may not be required for offline digital payments.   
  • The payment instruments will be enabled for offline digital payment transactions based on the customer’s consent.   
  • Only online replenishment of the used transaction limit will be permitted with AFA.   
  • The acquirer will bear the risk of technical or transaction security issues on the merchant’s end.  
  • Customers are also protected by the provisions of the RBI’s limited customer liability circulars.

Beneficiaries of the Offline Digital Payments framework

Electronic payment methods and e-commerce solutions dominate the world of digitisation. Almost all industries have shifted to online innovative methods, and India Regulatory Services has taken the lead in this transition. The offline digital payment will benefit all local merchants and retailers the most, but let’s see who else can benefit from this framework.

1. Digital banks and apps

The framework will benefit digital banks by increasing public awareness of digital payment solutions.

2. Digital payment app developers

There is a tremendous opportunity for online digital payment software development firms to create more user-friendly and robust software solutions that can integrate with this new framework.

3. Local merchants, vendors, and retailers

This framework will benefit local merchants by increasing foot traffic and promoting cashless payment methods. Their customers can transact more easily for small purchases such as household goods and groceries. Small recharges and toll payments can also be made using this method, which affects a large number of small businesses.


The Indian payments industry is ever-changing. It is introducing new and improved payment methodologies to increase digital payment adoption in even the most remote areas while decreasing cash flow in the economy. One such addition to the family of this ongoing revolution is offline digital payment.   

The initial concept places a strong emphasis on bringing the semi-urban and rural populations on board and educating them about this new payment technology. However, it is only a matter of time before the urban population starts using this payment method to process transactions when there is no internet or telecom connectivity. This technology has enormous potential and a bright future.  


1. What are Offline Digital Payments?

Ans: Offline digital payments refer to transactions made using digital payment methods, such as mobile wallets or contactless cards, without requiring an active internet connection at the point of sale. These transactions are typically processed through near-field communication (NFC) technology or QR codes.

2. How do Offline Digital Payments work?

Ans: Offline digital payments work by leveraging technologies like NFC or QR codes. In the case of NFC, the customer’s mobile device or contactless card communicates with the merchant’s payment terminal wirelessly to transfer payment information. For QR codes, the customer scans a QR code displayed by the merchant using their mobile device’s camera or a dedicated QR code scanner app, which initiates the payment process.

3. What are some examples of Offline Digital Payment methods?

Ans: Examples of offline digital payment methods include:

  • Mobile Wallets: Mobile payment apps allow users to store their payment card details on their smartphones and make contactless payments at NFC-enabled terminals, even without an internet connection.
  • Contactless Cards: Payment cards equipped with NFC technology enable users to tap or wave their cards near a compatible payment terminal to complete transactions.
  • QR Code Payments: QR code-based payment solutions, allow users to scan a merchant’s QR code using their mobile device’s camera and authorise the payment.

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