Google Pay, PhonePe, Others Join RBI's Digital Currency Pilot

Fintech giants to offer e-rupee transactions after receiving central bank approval

Aug 5, 2024 - 21:57

Major fintech players in India, including Google Pay, PhonePe, Cred, Mobikwik, and Amazon Pay, are set to join the Reserve Bank of India's (RBI) digital currency pilot. These companies will offer e-rupee transactions to their users after obtaining necessary approvals from the central bank.

The RBI initiated its digital currency pilot in December 2022, initially allowing only the central bank to offer e-rupee services through its mobile app. However, in April 2023, the RBI opened the doors for fintech companies to participate in the pilot.

While fintech startups have been seeking clarity on the rules for engaging with banks to implement central bank digital currency (CBDC) use cases, they are now actively collaborating with the RBI, National Payments Corporation of India (NPCI), and the domestic payment authority. These companies are expected to launch e-rupee access within the next three to four months.

Despite initial enthusiasm, digital currency transactions have witnessed a significant decline, dropping from over 1 million per day to just 1-2 lakh per day currently. The RBI has indicated no immediate plans for a full-scale launch of the digital currency.

Banks are actively engaging with fintech startups to explore various CBDC use cases. Two primary use cases being tested in the first phase of the CBDC retail pilot for non-bank payment service operators (NBPSOs) include subsidy payments for farm inputs and corporate expense management.

RBI Deputy Governor T Rabi Sankar recently reported that 2.2 crore transactions have been processed since the launch of the CBDC pilot, involving 46 lakh users and 4 lakh merchants. The focus is now shifting from peer-to-peer (P2P) transactions to peer-to-merchant (P2M) transactions as more merchants accept the digital rupee.

The CBDC, a digital version of the Indian rupee, is built on distributed ledger technology (DLT) and aims to serve as a digital alternative to physical cash. The pilot program, which includes both wholesale and retail segments, has seen growing participation from banks.

To boost CBDC adoption, the RBI introduced additional features like offline capability and programmability for retail payments in February 2023.