Google Pay, PhonePe, and Amazon Pay seek entry into RBI's digital rupee

These payment firms are collaborating with the RBI and the NPCI and are anticipated to introduce e-rupee access within the next three to four months, according to a Reuters report

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Google Pay, Walmart-backed PhonePe, and Amazon Pay are among five payment companies seeking participation in the Indian central bank's digital currency trial by facilitating transactions through the e-rupee, Reuters reported.

Indian fintech companies Cred and Mobikwik are also seeking to join the pilot, the report said, citing sources.

These payment firms are collaborating with the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), the country's payments authority, and are anticipated to introduce e-rupee access within the next three to four months, it added.

Expanding user base among falling transactions
 

Despite e-rupee transactions peaking at over 1 million daily late last year, they have since dropped significantly to approximately 100,000-200,000 per day, one source reported.

By allowing well-known payment firms to facilitate e-rupee transactions, the user base is expected to expand, potentially increasing transaction volumes, according to another source.

Collectively, these five payment firms account for more than 85 per cent of digital payments through UPI, which handles about 13 billion transactions monthly.

While the central bank continues to promote the e-rupee, there are no immediate plans for a full-scale launch of the digital currency, the report claimed.

The e-rupee would likely remain in the pilot phase for the next couple of years.

What is RBI’s digital currency?

The Reserve Bank of India initiated the e-rupee pilot, a digital counterpart to physical currency, in December 2022. Although there was an initial increase in e-rupee transactions, they have declined, indicating the challenges faced by central banks worldwide in promoting digital currencies.

Initially, only banks were allowed to offer e-rupee via their mobile apps, but in April, the central bank announced that payment firms could also provide e-rupee transactions on their platforms once approved by the RBI.

Google Pay and Amazon Pay, offered by Alphabet Inc.'s Google and Amazon.com, respectively, enable retail payments through India's widely used Unified Payments Interface (UPI).

India's digital rupee, also referred to as eRs or eINR, is a central bank digital currency (CBDC) issued by the Reserve Bank of India (RBI). It represents a tokenized digital version of the Indian rupee, operating on blockchain or distributed ledger technology.

The digital rupee aims to enhance financial inclusion, facilitate efficient digital transactions, and align with India's technological progress. Unlike cryptocurrencies like Bitcoin, the digital rupee is fully integrated into the RBI's monetary policy and payment infrastructure.

Key features of CBDC
 

The digital rupee serves as legal tender, accepted by individuals, businesses, and governmental bodies. It is issued in accordance with the RBI's financial policies 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 has the potential for programmable features such as smart contracts.

The RBI has introduced the digital rupee for wholesale (eRs-W) for interbank settlements and for retail (eRs-R) for consumer and business transactions. As of February 2023, the digital rupee had reached 50,000 users and 5,000 merchants.

The implementation of the digital rupee aims 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, according to the official statement.