A few weeks ago, the Reserve Bank of India announced it would add a new feature to the central bank digital currency (CBDC), popularly known as e-Rupee. For retail users, the upgrades would enable offline usage too and programmability — namely an e-Re can be set aside for a specific purpose and, if required, have an expiry date.
Both measures are expected to get more people to use the digital currency. But the lingering question is why go for the e-Re when the Unified Payments Interface or UPI is already doing all this?
With UPI being used as a quasi-proxy for cash, there is little to distinguish it from e-Re apart from differences in technology and the promised anonymity of transactions under e-Re. However, for transactions below ₹1 lakh and those that are domestic or retail in nature, anonymity isn’t a make-or-break factor. In fact, without need for a wallet, UPI offers every convenience ahead of retail CBDC.
Social media was recently abuzz with whispers of how a section of bankers who receive a part of their compensation, such as food expenses and reimbursements, through e-Re are resisting this forced adoption of the digital currency. If this is the reception from those who are supposed to be the change agents in digital currency adoption, then will sops such as programmability or offline usage be enough to induce common Indians to switch to e-Re?
While it is undeniable that demonetisation was an important factor in hastening the adoption of UPI, due credit must also go to the efforts taken by fintechs in the UPI ecosystem to popularise the technology among users. These go well beyond the gift scratch cards and discounts that they have offered from the start. More importantly, UPI promised safety, security and ease of transaction — features that are of paramount importance in the digital payment system. These are offered by e-Re, as well. Therefore, policymakers must come up with use cases that can make the e-Re irresistible to millennials and those newly joining the workforce. This may not only lead to wider adoption, but digital currency usage may also become a habit for them, rather than being thrusted on them. The attempted use of direct benefit transfer schemes alone to expand the reach of e-Re may not do the trick.