The Reserve Bank of India’s Annual Report 2020-2021 noted that the Covid 19 pandemic had propelled the country towards less-cash alternatives, an ecosystem that was already beginning to benefit from open innovation. After the staggering success of the Unified Payments Interface (UPI), a first of its kind, interoperable mobile banking system, the National Payments Corporation of India (NPCI) along with other government departments recently launched its next innovation, the e-RUPI, regarded by many as India’s first step towards a digital currency. Far from anything hi-tech, the e-RUPI makes a small, but sure step towards addressing the current barriers to digital financial inclusion.
Neither a voucher-based system, nor a mobile-based payments system is truly novel. Yet the combination of factors and features makes the e-RUPI an interesting development. Designed as a digital pre-paid voucher that targets purpose and person(s) for a given transaction, the e-RUPI promises to plug pilferage in welfare schemes, minimise delays and provide ease of access to beneficiaries. Apart from working through QR codes, it also offers transactions through SMS-based strings, eliminating the need for a smartphone or for beneficiaries to have a bank account. Apparently, all that a person would need is a mobile number.
As the euphoric dust settles, practical aspects of implementation will determine the success of e-RUPI. Firstly, just like any other digital payment instrument, e-RUPI relies on a certain set of stakeholders to provide services and participate in building the ecosystem. While the e-RUPI is not restricted to governments and welfare programs, it will need to bank on the private sector for game-changing scales of adoption.
Secondly, underlying the promise of digital payments and a cashless (or less cash) economy is the infrastructure that supports it. The enabling environment is as complex as the layers on it. Here we carve out two – infrastructure and identity. Access to mobile networks and affordable devices will continue to remain a necessity. India has made progress in leaps and bounds, yet the enormity of the task shows much remains to be done in terms of bridging the digital divide. As we discuss access, it is important to note that the metrics available today are focused on total number of subscribers and we are yet to get an accurate measure of unique subscribers – a figure that will be all too important for the growth and uptake of tools like e-RUPI. In addition to access, quality and reliability of mobile networks is also important. Certainly, the telecom or internet service provider will play a key role, but it is also the responsibility of product developers and vendors to ensure operability of the instruments. For instance, earlier this year, the Telecom Regulatory Authority of India released a list of 40 entities that were not fulfilling the norms on bulk commercial messages. SMSes and One Time Passwords (OTPs) sent by banks, payment companies, etc. are checked against registered templates in a process called SMS scrubbing, which were not being followed by several entities, including prominent banks. `
The other angle to be examined is the identity ecosystem. Given that a beneficiary’s mobile number is the point of action for the e-RUPI, it will rely on existing identification and verification instruments. Though not confirmed, it has been suggested that beneficiaries will be identified through mobile numbers linked to Aadhaar. While no one can deny the success of India’s JanDhan-Aadhaar-Mobile (JAM) trinity, it will be myopic to overlook the remaining challenges of erroneous inclusion, and the painful exclusion of the most vulnerable, arising from infrastructural and institutional lacunae. Introducing new technology-based welfare instruments without fixing these problems can rarely solve a public policy challenge. e-RUPI will probably expose the existing gaps more clearly, but unless action is taken on building the enabling environment, it may never achieve its inclusion goals.
Finally, we need a strong focus on digital literacy, to promote safe and inclusive adoption of new instruments such as e-RUPI. Even the rise of UPI payments was accompanied by a slew of scams using QR codes and other tools that targeted hapless consumers. With e-RUPI, some of these risks may be mitigated, but for the uninitiated, it can be easily manipulated. The digital literacy drive must focus on building a culture of privacy, protection of personal information and educating beneficiaries on the safe and secure use of digital instruments. This is also an area that will require greater collaboration with all stakeholders in the ecosystem. Reaching out to the marginalised and underprivileged communities through targeted campaigns will aid in achieving the inclusion goals e-RUPI has set for itself.
Struck by existing challenges of the ecosystem, e-RUPI may not be a game-changer, but it is certainly a step-up. Its success relies on a favourable environment and enabling circumstances, which will eventually push India closer to the digital frontier.
(Gangesh Varma is Consultant and Mansi Kedia is Fellow at ICRIER)
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