Indian Central Bank’s Digital Currency Pilot Program Attracts Top Payment Firms and Fintech Companies

Five payment firms, including GooglePay, Walmart-backed PhonePe, and AmazonPay, are vying to participate in the Indian central bank’s digital currency pilot program by facilitating transactions through the e-rupee, as disclosed by three sources directly engaged in the discussions. Additionally, Fintech companies Cred and Mobikwik have also submitted applications to be part of the pilot initiative. The Reserve Bank of India (RBI) initiated a pilot for the e-rupee, a digital alternative to physical currency, in December 2022. Despite an initial uptick, e-rupee transactions have decreased, mirroring the challenges faced by central banks worldwide in promoting digital currencies.

GooglePay and Amazon Pay are popular payment applications provided by Google and Amazon, respectively, enabling retail transactions through the unified payments interface (UPI). Initially, only banks were authorized by the apex bank to offer central bank digital currency (CBDC) via their mobile apps; however, in April, payment firms were also permitted to conduct e-rupee transactions on their platforms upon RBI approval. These payment entities are collaborating closely with the RBI and National Payments Corporation of India (NPCI) and are anticipated to introduce access to e-rupee within the next three to four months, according to the sources.

While daily transactions using the digital currency had peaked at over 1 million late last year, they have since dwindled to approximately 100,000-200,000 per day, revealed one of the sources. The inclusion of payment firms in offering e-rupee transactions is expected to enhance transaction volumes by broadening the user base, stated the second source. Collectively, these five payment firms contribute to more than 85% of digital payments via UPI, with an average of around 13 billion transactions each month.

Despite ongoing efforts to promote the e-rupee, the central bank currently has no immediate plans for a full-scale launch of the digital currency, as affirmed by the second source. “The e-rupee is anticipated to remain in the pilot phase for the next couple of years,” the source further elaborated.