Digital Payments

E-Rupi: Contactless and Cashless Digital Payment

As a new digital payment solution, e-rupi was launched recently. It is a cashless and a contactless instrument for digital payment. It has been launched with a view to ensure seamless transfer of benefits to the citizens. In this article, we shall discuss about this digital payment solution and also understand how it will work.

What is e-rupi?

It is a digital voucher which a beneficiary can get on his phone in an SMS or QR code form. It is a pre-paid voucher which can be redeemed at any centre that accepts it.

It is a one-time cashless and contactless voucher based mode of payment that allows users to redeem voucher without a card, digital payments app or any access to internet banking. It shouldn’t be confused with digital currency instead, it is a person-specific and purpose specific digital voucher.

How does it work?

To understand the concept of this digital payment solution and how it works, we have provided you an example below.

In case government seeks to cover a treatment of a particular employee in a specified hospital, then it can simply issue an e-rupi voucher for the determined amount through a partner bank. The employee shall get a SMS/QR code on his phone. Then that person can visit the hospital and avail of the services. After that can pay through the e-rupi voucher obtained on his phone.

Who has developed it?

This digital payment solution has been launched by the National Payments Corporation of India, which oversees the digital payments ecosystem in India. This has been developed in collaboration with the Department of Financial Services, Ministry of Health and Family Welfare and National Health Authority.

Benefits to the Consumer

This digital solution doesn’t require the beneficiary to have a bank account which is a major feature as compared to other digital payment platforms. It ensures an easy, contactless two step redeeming process.

Another benefit of this is that it is operable on basic phones and therefore can be used by persons not owning smartphones or in places that lack an internet connection.

Benefits to the Sponsors

It is expected to strengthen direct benefit transfer and also make it more transparent. As there is no requirement of physical issuance of vouchers, it will lead to cost savings also.

Benefits to the Service Providers

Considering that it is a prepaid voucher, e-rupi will ensure real time payments to the service providers.

Banks issuing e-rupi

The National Payments Corporation of India partnered with 11 banks for this digital payment solution. These banks are as follows:

• Axis bank;
• Bank of Baroda;
• Canara Bank;
• ICICI Bank;
• HDFC Bank;
• Indian Bank;
• IndusInd Bank;
• Kotak Mahindra Bank;
• Punjab National Bank;
• State Bank of India; and
• Union Bank of India.

Difference between e-rupi and Digital Currency

The introduction of this new digital payment solution is the first step towards digital currency in India. However, it is not a digital currency^[1] in itself rather, it is a social service voucher system that ensures that particular benefits reach eligible beneficiaries without any delay.

It shouldn’t be confused with the cryptocurrencies that allows you to purchase goods and services or trade them for profit making. Apart from this, it is government regulated. The prepaid voucher paid for by the government will be used initially to provide welfare subsidies.

As far as digital currency in India is concerned, the RBI had announced that it is exploring the need for a digital currency as a measure to enhance financial inclusion. India is not ahead in terms of issuing virtual cash, unlike countries in Europe etc., but the rise of cryptocurrencies has encouraged authorities to push for pilot projects.

The purpose of cryptocurrency is similar to that of e-rupi, which is to reach the unbanked population however, the approach is different. Cryptocurrencies are distributed and are decentralised medium of exchanges, whereas e-rupi is centralised.

Use cases of e-rupi

As per the government, e-rupi can ensure a leak-proof delivery of welfare services. It can be used to deliver services under schemes meant for providing nutritional support under Mother and Child Welfare schemes, eradication of TB programmes, fertilizer subsidies etc. The government further stated that even the private sector can leverage the digital voucher as part of their employee welfare & corporate social responsibility programmes.

Global examples of voucher based welfare system

There are various examples of voucher based welfare system. In the United States of America, there is a system of education vouchers/school vouchers which acts as a certificate of government funding for students who are selected for state-funded education. These are subsidies that are provided to the parents of students for the purpose of educating their children.

Apart from the United States, this voucher system has been utilized in many other countries such as Chile, Sweden, Hong Kong etc.

Conclusion

The National Payments Corporation of India (NPCI) tied up with almost 1600 hospitals where the digital payment solution- e-rupi can be redeemed. Experts believe that the user base of this new digital payment solution will widen further with the private sector’s entry.

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