Is e-RUPI Another Feather in India’s Digital Payments Cap?

India gets a digital boost with the launch of e-RUPI, a cashless and contactless one-time digital payment mechanism. While the new digital payment system may become the preferred mode for direct benefit transfers (DBT) as it could help avoid leakages in subsidy transfers, experts have also raised some concerns that need to be addressed.

The new digital payment mode is basically a prepaid voucher that can be issued directly to citizens after verifying mobile number and identity. Developed by the National Payments Corporation of India on its UPI platform, in collaboration with the Department of Financial Services, the Ministry of Health and Family Welfare, National Health Authority and 11 partner banks, the e-RUPI voucher will be delivered in the form of a QR code or SMS string-based e-voucher to the beneficiary’s mobile number, the government said in a press release.

The contactless payment system has been hailed by Prime Minister Narendra Modi as “a person and purpose specific digital payment solution and targeted delivery of benefits,” and is now available only for health services. At a later stage however, it will be expanded to other segments is in line with the BHIM-UPI payment system launched in December 2016.

While banks and payments systems have a huge role to play in this ecosystem, the PM said that the hospitals and corporate entities have also shown interest in adopting this technology. In fact, the e-RUPI can be used by even private corporate entities as part of their corporate social responsibility. Modi gave an example of a corporate sponsoring vaccination of 100 people in a private hospital. In that case, the beneficiary will get the vaccine free from the hospital, but only after showing the e-RUPI SMS or QR code.

However, in a report by Bloomberg Quint, Mihir Gandhi, partner and leader-payments transformation at PwC India said, “These could be any one-time payment options, such as gift vouchers, fuel top-up, donations and food subsidy. e-RUPI can be issued by government or by corporates to their employees for targeted use as it only allows purchase from merchant outlets, but does not permit direct cash out or peer-to-peer transfer.”

Bharat Panchal, Chief Risk Officer for India, Middle East & Africa for FIS Global, told CXOToday cautioned that e-RUPI needs some stronger controls to monitor any possible frauds.

“If real beneficiary starts encashing such vouchers in lieu of cash than it would be difficult to trace such pre-paid instruments once it starts to move from one hand to other.  Therefore , It would be effective to match the beneficiary’s details at the time of redemption to make sure that real beneficiary only is using it and not someone else,” he said.

According to a report by McAfee, QR based payments may give rise to Qshing or QR code-abuse.The report predicts that hackers will find opportunities to use social engineering to gain access to customer’s personal data in a single scan.

Experts also believe, e-RUPI as a digital payments solution can only work if the cybersecurity framework backing the prepaid instrument is resilient. There must be a two-step verification to identify the services are being delivered to the right beneficiary, and a grievance redressal process must be put in place to address the lags and user concerns.

Although the e-payments space in the country looks promising, there is a requirement for data protection laws and consumer protection laws in order to make the space more reliable and secure.

Avinash Shekhar, Co-CEO of ZebPay however believes that e-RUPI and digital currencies such as crypto assets can co-exist in the digital Indian economy.’

Despite challenges however, the last one and half years have seen amazing shifts in the digitization of payments in India. ACI Worldwide’s recent report indicated more than 70.3 billion real-time payments transactions were processed globally in 2020, a surge of 41% as compared to the previous year. It projected a CAGR for real-time payments of 23% from 2020 to 2025.

For example, the BHIM UPI not only made it easy for businesses to transact money but also empowered the hundreds of small businesses with seamless transactions. The UPI system has indeed changed the payment landscape in India and has become the preferred mode of payment in many cases. In July alone, UPI registered 3 billion transactions, worth Rs 6 trillion-plus.

So, while it’s too early to predict the success of e-RUPI, its clear that with Covid-19 pandemic placing a greater reliance on real-time and digital payments, the trend is here to stay. It and evolve as new technologies and platforms.