The development of digital currencies and payment technologies has altered the financial transaction environment. In India, two notable systems have emerged, namely the Digital Rupee or e-RUPI, and the Unified Payments Interface (UPI). Although both facilitate digital payments, they operate on distinct principles and serve specific purposes. This article aims to examine the fundamental distinctions between e-RUPI and UPI, providing insights into their functionalities, use cases, and implications for consumers and businesses. By delving into these differences, we can gain a deeper understanding of how these systems operate and the unique benefits they offer in the realm of digital payments.
e-RUPI (Electronic Rupee)
As a blockchain-based digital currency, it serves as a form of legal tender issued directly by the central bank. e-RUPI aims to provide a secure and tamper-proof payment mechanism, facilitating smooth transactions across different entities such as governments, businesses, and individuals. By utilizing blockchain technology, e-RUPI enhances transparency, efficiency, and reliability in financial transactions. This digital currency has the potential to revolutionize the financial landscape in India, promoting digitalization and enhancing the ease of conducting financial transactions for various stakeholders.
Unified Payments Interface (UPI) Fundamentals
The introduction of the Unified Payments Interface (UPI) came about through the efforts of the National Payments Corporation of India (NPCI) as a real-time payment system. It provides users with a seamless and instant way to transfer funds and make payments to merchants through mobile applications. UPI operates on a peer-to-peer (P2P) and peer-to-merchant (P2M) model, allowing users to send and receive money using unique virtual payment addresses (VPAs) linked to their bank accounts. This system eliminates the need for traditional bank account details during transactions, enhancing convenience and security. With UPI, users can make payments 24/7, transfer funds instantly, and access a wide range of banking services, including bill payments, merchant transactions, and more. Its user-friendly interface and interoperability across different banks and payment service providers have made UPI a popular choice for digital payments in India.
E-rupee vs UPI
e-RUPI and UPI are two distinct digital payment systems in India, each serving different purposes and catering to specific transaction needs. e-RUPI is a voucher-based payment system introduced by the Indian government and the RBI. It functions as a one-time, contactless payment mechanism aimed at ensuring targeted delivery of services and benefits. e-RUPI transactions involve the issuance of unique vouchers or QR codes to beneficiaries, which can be redeemed at designated merchants or service providers. This system enhances transparency and accountability by ensuring that the payment is utilized for the intended purpose. UPI enables instant and seamless peer-to-peer (P2P) and peer-to-merchant (P2M) transactions through mobile applications. Users can link their bank accounts to UPI and perform various transactions such as fund transfers, bill payments, and merchant payments. UPI provides a convenient and interoperable platform for digital payments, allowing users to make transactions with ease. e-RUPI is focused on targeted and purpose-driven payments through vouchers or QR codes, while UPI offers a broader range of transaction options, allowing users to transfer funds and make payments using their bank accounts.
Technological Distinctions
e-RUPI leverages distributed ledger technology (DLT) or blockchain, which guarantees secure and transparent transactions. e-RUPI uses DLT to create a decentralized network in which transactions are recorded and confirmed by numerous members. This architecture enhances security and fosters trust in the system. On the other hand, UPI operates on a centralized system, where transactions are processed through different banks and payment service providers. While UPI offers convenience and interoperability, e-RUPI’s adoption of blockchain technology provides an added layer of transparency and immutability, making it suitable for targeted payment purposes and ensuring the integrity of transactions.
Issuer and Authorization
e-RUPI is exclusively issued by the Reserve Bank of India (RBI) and holds the status of a legal form of digital currency in India. e-RUPI, being a Central Bank Digital Currency (CBDC), is authorized and regulated by the RBI, functioning as the central authority responsible for its issuance and governance. In contrast, UPI does not function as an independent currency; rather, it serves as a payment infrastructure that facilitates the smooth transfer of funds between bank accounts using unique UPI IDs. UPI leverages existing bank accounts and acts as a facilitator for transactions, providing a convenient and interoperable platform for digital payments. While e-RUPI represents a form of a digital currency issued by the central bank, UPI operates as an intermediary payment system connecting different bank accounts.
Use Cases
e-RUPI is primarily intended for targeted use in specific welfare schemes, subsidies, and government payments. It acts as a direct benefit transfer (DBT) mechanism, ensuring that the intended beneficiaries receive the benefits directly without the involvement of intermediaries. This targeted approach helps enhance transparency, eliminate leakages, and ensure that the benefits reach the intended recipients efficiently. In contrast, UPI offers a broader scope of transactions, catering to various financial needs of individuals and businesses. It facilitates person-to-person transfers, bill payments, online shopping, merchant transactions, and more. UPI’s versatility and wide acceptance among banks and payment service providers make it a convenient and popular choice for everyday digital payments. It provides users with a seamless and interoperable platform to conduct a wide range of financial transactions, offering convenience, speed, and security.
Privacy and Anonymity
e-RUPI transactions offer a higher level of privacy and anonymity compared to UPI. When using e-RUPI, users are not required to link their bank accounts, which means that personal information and financial details are not shared during transactions. This enhances users’ privacy and guarantees the confidentiality of their personal data. In contrast, UPI transactions operate through linked bank accounts, necessitating users to share their account details, including their UPI IDs, to initiate and complete transactions. While UPI transactions are secure, e-RUPI offers an additional layer of privacy by keeping users’ financial information separate from the transaction process
Inclusivity and Accessibility
UPI has witnessed extensive adoption and is easily accessible to users through a multitude of mobile applications provided by banks and payment service providers. Its widespread availability allows users from different banks to participate in UPI transactions seamlessly. This has contributed to the rapid growth and popularity of UPI as a preferred digital payment method across a wide range of users and businesses. On the other hand, e-RUPI’s adoption is more targeted and limited in scope. It is primarily utilized for specific government welfare schemes and benefits, making it accessible to a narrower set of beneficiaries. The focus of e-RUPI is to streamline and ensure the efficient delivery of government payments, subsidies, and targeted welfare benefits to the intended recipients.
Conclusion
To summarise, e-RUPI and UPI are two distinct digital payment systems in India, each catering to different use cases and operating on unique principles. While e-RUPI serves as a secure and targeted benefit transfer mechanism introduced by the RBI, UPI is a real-time peer-to-peer payment system facilitated by the NPCI. Understanding the differences between these two systems is crucial for consumers, businesses, and policymakers to make informed decisions regarding their digital payment preferences and requirements. As the financial landscape continues to evolve, both e-RUPI and UPI contribute significantly to the transformation of India’s digital economy.
