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Google Pay, Walmart-backed PhonePe, and Amazon Pay are among five payment companies seeking to participate in the Indian central bank’s digital currency trial by facilitating transactions through the e-rupee, according to Reuters. Indian fintech companies Cred and Mobikwik are also aiming to join the pilot.
Collaboration and Anticipated Launch
These payment firms are working with the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), which is the country’s payments authority. The introduction of e-rupee access is expected within the next three to four months.
Current Transaction Trends
E-rupee transactions peaked at over 1 million daily late last year but have since decreased significantly to approximately 100,000-200,000 per day. However, involving well-known payment firms is anticipated to expand the user base and potentially increase transaction volumes.
Market Share and Future Plans
The five payment firms collectively account for over 85% of digital payments through UPI, which handles about 13 billion transactions monthly. While the central bank continues to support the e-rupee, there are no immediate plans for a full-scale launch, and the digital currency is expected to remain in the pilot phase for the next couple of years.
E-Rupee Pilot and Challenges
The RBI launched the e-rupee pilot in December 2022 as a digital counterpart to physical currency. Although initial transaction volumes increased, they have since declined, reflecting global challenges faced by central banks in promoting digital currencies.
Expansion and Features
Initially, only banks offered e-rupee via their mobile apps. However, in April, the central bank allowed payment firms to provide e-rupee transactions on their platforms with RBI approval. Google Pay and Amazon Pay facilitate retail payments through India’s Unified Payments Interface (UPI).
Digital Rupee Details
India’s digital rupee, also known as eRs or eINR, is a central bank digital currency (CBDC) issued by the RBI. It represents a tokenized digital version of the Indian rupee, operating on blockchain or distributed ledger technology. Unlike cryptocurrencies like Bitcoin, the digital rupee is integrated into the RBI’s monetary policy and payment infrastructure.
Benefits and Implementation
The digital rupee aims to enhance financial inclusion, facilitate efficient digital transactions, and align with India’s technological progress. It is accepted by individuals, businesses, and governmental bodies as legal tender and can be converted into physical cash through commercial banks. Transactions using the digital rupee are processed more quickly and securely compared to traditional banking systems. Additionally, the digital rupee may include programmable features such as smart contracts.
Current Adoption
As of February 2023, the digital rupee had reached 50,000 users and 5,000 merchants. The implementation of the digital rupee is also expected to reduce the security printing costs associated with physical currency, which amounted to approximately Rs 5,000 crore for the public, businesses, banks, and the RBI.
Multiple-Choice Questions (MCQs):
1. Which payment companies are seeking to participate in the Indian central bank’s digital currency trial?
a) Google Pay, PhonePe, Amazon Pay
b) PayPal, Stripe, Samsung Pay
c) Apple Pay, AliPay, WeChat Pay
d) Venmo, Square, Zelle
Answer: a) Google Pay, PhonePe, Amazon Pay
2. What is the anticipated timeline for the introduction of e-rupee access by these payment firms?
a) 1-2 months
b) 6-12 months
c) 3-4 months
d) 12-18 months
Answer: c) 3-4 months
3. What percentage of digital payments through UPI do the five payment firms account for?
a) 50%
b) 75%
c) 85%
d) 90%
Answer: c) 85%
4. What are the two types of digital rupees introduced by the RBI?
a) eRs-W and eRs-R
b) eRs-T and eRs-L
c) eRs-C and eRs-F
d) eRs-B and eRs-M
Answer: a) eRs-W and eRs-R
5. As of February 2023, how many users and merchants have adopted the digital rupee?
a) 10,000 users and 1,000 merchants
b) 25,000 users and 2,500 merchants
c) 50,000 users and 5,000 merchants
d) 100,000 users and 10,000 merchants
Answer: c) 50,000 users and 5,000 merchants