New Delhi: Prime Minister Narendra Modi Monday launched a new mode of cashless and contactless digital payment to ensure seamless transfer of benefits to the citizens in a “leak-proof” manner.
ThePrint explains how this digital payment solution will work, what the government’s main goals behind introducing it are, and how different it is from cryptocurrencies.
What are these vouchers?
e-RUPI is an e-voucher, which will be delivered to beneficiaries in the form of a QR code and SMS-string-based voucher through which funds will be directly transferred to their bank account.
Any government agency and corporation can generate e-RUPI vouchers via their partner banks.
A beneficiary will be required to show the QR code or the SMS message to the merchant, who will scan the same and a verification code will be sent to the beneficiary’s phone number. The latter will have to share the code with the merchant and the payment will be successful.
These vouchers are person- and purpose-specific, meaning if they are released by the government for the purpose of vaccination, for instance, then they can be redeemed only for that.
The one-time payment mechanism has been developed by the National Payment Corporation of India (NPCI), with the support of the Department of Financial Services, the Ministry of Health and Family Welfare, and the National Health Authority.
State Bank of India, HDFC Bank, Axis Bank, Punjab National Bank, Bank of Baroda, Canara Bank, IndusInd Bank, and ICICI Bank have come on board as partners.
Benefits and loopholes
Aimed at bridging the digital gap among the unbanked population, the beneficiaries or users of this payment mechanism will not require a card, digital payments app, or internet banking access to redeem the voucher.
e-RUPI transaction process is said to be secure and will be keeping the details of the beneficiaries completely confidential, maintaining their privacy.
The introduction of Covid vaccination voucher is also aimed at ramping India’s vaccination drive as e-RUPI allows beneficiaries to easily book appointments for the shots.
“The main objective and long-term vision behind e-RUPI is to reach 190 million unbanked citizens, fold them into a formal financial system, and close part of the digital gap. This digital payment system can provide equal access to financial, healthcare, and welfare services to each and every citizen of our country,” Hitesh Malviya, founder of itsblockchain.com, India’s first and oldest blockchain and cryptocurrency publication platform, told ThePrint.
However, with the beneficiary not required to disclose their identity, these vouchers are also likely to be claimed by other people.
“The government has maintained the privacy issue here but if the merchant doesn’t cross-check someone’s identity then anyone can claim these benefits,” said Harshit Sharma, COO of FinFloww, an upcoming voice-first platform aimed at making financial knowledge cool with the use of the latest technologies like AR and voice tech.
How is e-RUPI different from digital currencies?
While the introduction of e-RUPI is the first step towards having a digital currency in India, it in itself is not a digital currency but rather a social service voucher system, to ensure the reach of particular benefits to the eligible beneficiaries without any discrepancies and delay.
This is different from cryptocurrencies that let you buy goods and services, or trade them for profit. More importantly, it is government-regulated. The prepaid voucher that is paid for by the government will largely be utilised, at least initially, to provide welfare subsidies.
However, regarding the introduction of digital currency in India, the Reserve Bank of India (RBI) in January this year announced that it is exploring the need for a central bank digital currency in India as a measure to enhance financial inclusion.
India is not a frontrunner in the race to issue virtual cash, unlike China, Europe and some other countries, but the rise of cryptocurrencies such as Facebook’s Diem, has encouraged the authorities to push for pilot projects in wholesale and retail segments in the near future.
“While cryptocurrency is based on blockchain, e-RUPI is based on UPI systems. It is very similar to the gift vouchers we get online but this time it is the government who is releasing it. This may be the government’s first step in launching a digital currency,” said Sharma.
Pointing out how these vouchers cannot be converted into cash, he said, “The government is promoting liquidity in the economy. It is saying go out, buy it, spend it. Earlier, the government used to send funds into the beneficiary’s accounts which don’t get used or most of the time used for some other purposes”.
Malviya said: “The purpose of cryptocurrencies and e-rupee is the same — to reach the unbanked population but the approach is different here, cryptocurrencies are distributed, and decentralised medium of exchanges. On the other hand, e-RUPI is centralised but one of its kind digital payment protocol”.
Which nations have them?
The US, South Korea and several other countries have used similar voucher-based incentives for welfare services.
“Few states in the US have implemented a digital voucher-based system for educational institutions to create targeted delivery structures. But no country has implemented an e-voucher system on a massive scale in the past,” said Malviya.
“e-RUPI is one of the government’s attempts, and the successful deployment of e-RUPI can boost India’s GDP by 14 per cent, which sounds very promising for a better future of Indian economy,” he added.