Offline payments are asynchronous transactions that allow you to conduct digital payments even without Internet connectivity. Understanding how offline payment methods work is essential for businesses operating in areas with limited network access. In this article, we will explore the workings of offline payments, including offline EMV payments and store-and-forward payments. We will also discuss the benefits these solutions offer to both consumers and merchants, such as convenience and reduced reliance on network connectivity.
Table of Contents
What are Offline Payments?
Offline pay is a transaction processed asynchronously, with a delay in payment processing compared to real-time online payments. Offline payments are made using cash, cheques, bank transfers and postal orders. They exclude online payment options like cards and wallets.
By accepting offline payment methods, a business can provide flexibility to customers and extend its reach to areas without online payment support. For example, you can make an offline payment by visiting a physical store or sending a check through mail. Offline payments offer convenience and reliability when Internet connectivity is unavailable.
How Does Offline Payment Work?
Offline payments are convenient for conducting transactions when network connectivity is temporarily lost. When you initiate an offline payment, the terminal performs several checks to determine if the payment can be completed offline.
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It checks if offline payment types are enabled. If not, the payment is declined.
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The terminal verifies if the issuer configured the card to process offline payments.
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It also confirms if it has reached its maximum limit for store-and-forward offline payments.
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The transaction amount must fall within the maximum limit set for offline payments.
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The payment scheme used also plays a role in determining if offline payments are supported.
If all these checks are approved, the following steps are performed:
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The terminal securely stores the card data and transaction details for later processing.
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For standalone terminals, a receipt is printed for both you and the merchant as proof of payment.
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In the case of local integrations, a transaction response with data required for receipt generation is generated and sent to your mobile number or email address.
These steps ensure that you can conveniently make payments even without Internet access, using offline payment methods like offline EMV payments or store-and-forward payments.
Types of Offline Payment
There are two types of offline payment methods available for integration when network connectivity is unavailable:
1. Offline EMV Payments
This offline digital payment method involves the payment terminal verifying the entered PIN against the EMV chip in the card and requesting approval from the card itself. The card issuer’s configuration determines the approval of the transaction. Offline EMV payments have a higher approval rate than other methods, but they are typically supported by major credit card schemes and not by most debit cards.
2. Store-and-Forward Payments
Under this offline payment example, payments are approved by the payment terminal without any verification. This results in a higher risk of rejection by the issuer than offline EMV transactions. The authorisation rates can vary but generally range from 95% in some industries to slightly higher percentages. Major credit and debit card schemes for contact chip and contactless transactions support store-and-forward payments. They can proceed with offline payment processing with any Cardholder Verification Method (CVM), such as PIN and signature. Keep in mind though, it is not supported for most local card schemes, QR code wallets, magnetic stripe transactions or cashback.
Advantages of Offline Payment
HDFC Bank’s OfflinePay is a wallet that offers numerous benefits for offline payment methods. Let’s explore these advantages:
1. Easy access:
OfflinePay can be installed via the app store on your device, making it convenient for you to transact without Internet access. You can easily set up the OfflinePay app on your smartphone or other devices.
2. Convenience:
You can add money to your OfflinePay wallet and utilise it for small payments, even when there is no network connectivity on either your end or the merchant’s end. This means you can make purchases or pay bills seamlessly, even in remote areas with limited or no Internet access.
3. Reduced load:
OfflinePay helps alleviate the strain on core banking systems and facilitates deferred payment processing in situations with limited or no network access. It allows you to complete transactions without overloading the banking infrastructure, ensuring smooth and efficient payment processing.
4. Accessibility in uncertain situations:
Offline payment systems like OfflinePay are particularly beneficial in network blind spots like basements, parking lots, lifts, malls and large buildings. They come in handy during travel by train, ferry or aeroplane when network coverage can be inconsistent. In situations of high network congestion, such as concerts, festivals and sporting events, OfflinePay can help alleviate the load on the network. Additionally, OfflinePay serves as a reliable payment solution in low connectivity areas like Tier 3 / 4 / 5 towns, as well as rural areas.
Exploring the Benefits of Offline Payments for Both Consumers and Merchants
For Consumers
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You can set a secure PIN to protect your offline digital payments, ensuring that your funds remain safe.
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You can easily access your wallet balance, review transaction history, and add funds whenever required.
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You have the flexibility to add funds to your OfflinePay wallet using UPI-based electronic payments.
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If you decide to close your OfflinePay wallet, any remaining balance will be refunded to the bank account linked with your registered mobile number within seven days.
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OfflinePay is specifically designed for low-value transactions, with a maximum transaction amount limit of ₹200.
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You can make a maximum of five transactions offline using OfflinePay.
For Merchants
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With digital payments for offline businesses, merchants can access information about the most recent 50 transactions processed offline, allowing them to track sales even without an Internet connection.
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It provides essential transaction details such as settlements, validation of offline transactions, and a list of recently accepted transactions, along with their status.
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Merchants can view transaction details on a date-wise basis, with one-click access to additional information about the payment source and transaction details.
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It enables merchants to monitor the settlement status of their transactions and provides a summary of settlement and calculation details.
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Merchants have the option to download reports containing transaction count, transaction amount, refund count, adjustment amount, dispute adjustment, and details of failed or pending transactions.
Frequently Asked Questions
1. What is the limit of offline payment?
The limit for offline payments depends on the payment method and service provider. For example, some mobile wallets may have a daily transaction limit of ₹10,000 for offline payments.
2. What are the risks of offline payments?
Offline transactions are processed asynchronously. There is a possibility of double-spending or fraudulent activities if proper security measures are not in place. Additionally, if the transaction data is compromised during the offline period, it could lead to unauthorised access to sensitive information.
3. What is the process of offline transactions?
Offline transactions typically involve storing the payment data securely on your device when internet connectivity is lost. The data is then transmitted to the merchant’s system once connectivity is restored.
4. Are offline payments secure?
Offline payments can be secure if appropriate security measures are implemented. Encryption techniques and secure storage mechanisms are used to protect sensitive payment data during the offline period. Both consumers and merchants need to use trusted and reliable payment service providers that prioritise security.
5. Can I use offline payments for online purchases?
Offline payments are primarily designed for in-person transactions where Internet connectivity may be temporarily unavailable. They are not commonly used for online purchases as most e-commerce platforms require real-time authorisation and verification of transactions.
6. Are there any fees associated with offline payments?
The fees associated with offline payments vary depending on the payment service provider and the specific solution being used. Some providers may charge a small fee per transaction or a monthly subscription fee for using their offline payment services.
