How e-Rupi will boost India’s fintech sector

Digital payments are becoming quite ubiquitous in India, with UPI seeing monumental volumes in transactions every month. Bolstering the dream of a digital economy, the government has now come up with a plan for leveraging the digital infrastructure so that there is ‘leak-proof delivery’ of its welfare schemes.

With the newly launched e-Rupi digital payments platform, India has now taken its first step towards having its own digital currency.

The Indian economy has always been largely cash-dependent, and while the government has been making efforts to digitise the economy, still much remains to be done. With this new platform, the government hopes to encourage as well as accelerate the adoption of digital payments and bring down the cash to GDP ratio.

With more and more people overcoming their wariness about digital transactions, fintech, in turn, will be able to reach out to more consumers who had earlier been left out by the formal economy and financial services sector, especially in rural India.

So what exactly is e-Rupi?

One can imagine an e-Rupi to be comparable to a prepaid voucher, that is redeemable at specific centres. What is even more special about it, is that one does not need any credit or debit card, mobile app or internet banking to use it.

Developed by the NPCI in collaboration with the Department of Financial Services, Ministry of Health and Welfare and National Health Authority, e-Rupi seeks to connect beneficiaries and service providers digitally, making it a personal purpose-specific payments platform.

It is a secure way of conducting transactions, since it keeps the beneficiaries information confidential, and is trackable by the issuer. Authorised by a verification code, it is a QR-based or SMS string-based voucher.

Being looked upon as a catalyst for boosting financial inclusion in the country - what makes it different from UPI, although working on the same network, is that the beneficiary does not need to have previously requisite basics like a bank account or payment apps to avail it.

Advantages of e-Rupi for the Indian finctech sector

- One of the biggest advantages of e-Rupi is the penetration of digital transactions, which of course has been a fintech focus as well. Fintech has already emerged as one of the biggest enablers of extending credit to the underserved, having said that however, it does have its limitations. With e-Rupi, looking to cast a wider net, the benefits that cascade in the form of more inclusion and data, is, of course, welcomed by the financial services industry.

- Already, the pandemic has seen massive growth in the fintech sector, especially in the area of digital payments. With a new cashless and contactless digital payments platform, the sector can expect its growth to be further accelerated, especially in rural India, which is the hub for most direct benefit transfers. Undoubtedly, the current tech divide that exists between the urban and rural population will see a reduction with the creation of a digital ecosystem.

- By promoting financial inclusion, the economy of the country will get bolstered from the ground up. Furthermore, the flexible and scalable framework will create a path for the use of the aforementioned vouchers in public, private and corporate setups. Since the use of e-Rupi platform is not restricted for government agencies alone, the private sector can utilise it for activities such as CSR programmes, employee welfare, etc.

- With e-Rupi in place, and as more and more people begin to transact digitally, it will create a digital financial footprint that will further enable credit agencies as well as financial services companies in mapping better.

This, of course, leads to the advent of even more products that are tailored to the requirement of the particular segment in the market, which is relatively untapped and hitherto holds tremendous potential.

India is currently the biggest destination in Asia for fintech deals, with investments in the sector having crossed the $10 billion mark over the period of 2016 to 2020. Since the RBI and the government are working upon introducing a Central Bank Digital Currency or CBDC, e-Rupi is just the stepping stone needed to ensure that CBDC is a success

The success of digital financial services and in turn the fintech sector depends upon its penetration into our day to day lives, and the eventual transformation of rural India from a cash-driven economy to a more digital payments economy.

As more and more people become technology-driven, via platforms like e-Rupi, it also ends up mitigating the risks of frauds, thus inspiring more faith in the fintech sector with the resultant increase in digital adoption.