e-RUPI: INDIA's DIGITAL PAYMENT SOLUTION - Vedika Binani

The e-RUPI, a digital payment tool, was introduced by the prime minister on August 2. The main objective of e-RUPI is to connect with 190 million unbanked people in order to integrate them into the legal financial system and help bridge some of India's digital divide. It has the ability to ensure that every citizen has fair access to financial, medical, and social services. Confused as to how it will work and if it is the same as digital currency? Let’s understand it from the scratch.

 

Why do we need e-RUPI in the first place?

Under 351 different programmes, the Central Government provides direct benefit transfers (DBT) to its citizens each year. Comparing the first half of 2021 to the same time in the previous year, the overall volume of DBT surged by about 37% to around INR 3.9 lakh crore. The transfer of pensions, fertiliser subsidies, the now-discontinued LPG subsidy, Covid-related income, and other benefits are appropriate inclusions in DBTs. However, there were several bogus accounts and aliases producing leaks in these payments, depriving the legitimate owners of their advantages. The e-RUPI may precisely monitor every benefit received, guarantee that the money is used for the intended purpose, and time-limit the spending capacity to prevent abuse or misuse.  It hence prevents theft and guarantees seamless benefit payments. The prepaid nature of the system ensures that payment is made directly to the service provider without the need for a middleman. Also, it caters to the segment of the population who might not have access to payment methods like digital payment applications, net banking, or cards. Any organisation wishing to contribute money to a particular purpose, such as the medical care or education of a certain person, only has to utilise an e-RUPI voucher instead of cash through their affiliated banks.

 

So how exactly does this work?

Numerous banks in the public and private sectors have been boarded by the Indian government. These banks will act as primary e-RUPI voucher issuers. Corporates or governmental organisations must contact these licenced banks in order to receive e-RUPI vouchers. In addition, they must provide a list of the recipients of the voucher, together with the names, mobile numbers, and purposes for which the voucher is intended. Then, using National Payments Corporation of India’s (NPCI) assistance, an authorised bank will produce customised vouchers. After that, the company will distribute the coupons to the recipients directly. A QR code or an SMS will be used to deliver the coupons to the recipients. These coupons can only be used at the designated centres by the recipients. Additionally, an OTP (one-time password) may be used to request them to authenticate the voucher.

So, anyone with a simple feature phone may utilise the e-RUPI, and the beneficiary does not need to have a bank account. According to research, over 400 million feature phone users in India would gain substantially from the e-RUPI, since they may use the voucher to make purchases without a card, a digital wallet, or online banking access, which all require a smartphone with access to the internet. Through this method, users may make payments at any time and from any location.

 

How is it different from the Central Bank Digital Currency (CBDC)?

e-RUPI and digital currencies are often misunderstood. The two, however, are very unlike from one another. How? Read on.

e-RUPI is not a digital payment service like Paytm or GooglePay. It's a straightforward mechanism that service providers may use to send redeemable coupons to recipients directly. In essence, it is a government-sponsored voucher-based system whose benefits-transfer mechanism heavily relies on Indian rupees. It differs significantly from digital money in terms of both its specifications and its function. The development and success of e-RUPI will be heavily reliant on end-use scenarios.

On the other hand, CBDC focuses more on assisting people in making payments whenever necessary using their digital payment applications. With the least amount of government meddling, the RBI is its only owner. For users to utilise digital currency to make payments, they must also have an account with a bank or the RBI. It's a strategy to drive users like us away from cryptocurrencies like bitcoin and to lessen the amount of currency flowing through the system.

 

Can e-RUPI be a game changer?

The operational intent is growing along with the practical use of e-RUPI. Corporates and other stakeholders are now reaping the benefits of this voucher-based system, which was previously solely used by government organisations to provide benefits to recipients, as in the case of the Ayushman Bharat Scheme. Private organisations can make use of e-RUPI to reward their staff members or even use these e-vouchers in their corporate social responsibility (CSR) programmes. In addition, e-RUPI is extensively used in the education, healthcare, and other related sectors. The MSME segment also may find it easier to access loans with the aid of e-RUPI. The government's plan and the technology it uses would improve India, especially the less fortunate section of the country.

This is simply one more step made in the direction of creating a digital India and there is much more to come!