Digital payment is a broad term and due to that often people misunderstand or interchange terminology without knowing the difference. UPI was launched back in 2016 while E-rupee is less than a year old. It is still in the early stage and not all people have access to it which has led to some misunderstanding and confusion due to lack of practical knowledge. In this article, we aim to resolve one such confusion, which is E-rupee Vs UPI what’s the difference?
Basic difference
E-rupee is the official digital currency of India which means it holds a value similar to cash. Whereas, UPI is a medium through which we transact money. Multiple digital payment apps such as Gpay, Paytm, PhonePe, etc use UPI infrastructure to enable users to transact money. Whereas E-rupee is just the digital representation of paper money.
Differences in their operation
In the case of UPI, to transfer money, both the sender and the recipient must have an active bank account and have their accounts linked to one of the UPI applications. A bank serves as the intermediary when you transmit money via a phone number or scan a QR code. The bank will withdraw the funds from your account and credit the beneficiary’s account with them. This entire transaction is recorded. Additionally, UPI transactions are only possible when there is internet connectivity.
Let’s use an analogy to better comprehend the E-rupee procedure now. Consider visiting a store to make a purchase. You now get your wallet out and give the merchant cash. In this instance, there was no need for an internet connection, no middleman, and no agency to maintain track of the transaction. Using E-rupee, transactions are made exactly as described. Once you have purchased a certain amount of E-rupee also referred to as a currency token or voucher say worth 1000 Rs in your digital wallet. You can transfer the amount by scanning a QR code or using a phone number without being connected to the internet as long as the need arises to recharge your digital wallet. As there is no middleman, these transitions are not recorded giving users anonymity.
Unique features
- First, let’s discuss the E-rupee. E-rupee is merely the digital equivalent of paper money, and it is governed by the same rules. Similar to how a transaction over a certain threshold with paper money necessitates the submission of pan card information, an E-rupee transaction over that threshold necessitates the presentation of the pan card information. Since UPI is a medium and all transactions are made through bank accounts, this does not apply to it.
- UPI requires a bank account, as we’ve established, whereas E-rupee doesn’t even require you to have one. Once you have created the digital wallet it is directly operated by RBI rather than a bank. This eliminates middlemen giving more privacy and convincing.
- UPI allows you to link your same bank account with different UPI applications by generating multiple UPI IDs for the same bank account. This is not an option when it comes to a digital wallet in which you hold your E-rupee. Only one wallet can be created by a registered mobile number.
What’s the future technology of digital payment?
E-rupee is a much newer technology as compared to UPI and still, it will take a while for people to adapt to it. The question of whether people will be willing to switch is, however, considerably more crucial. Since its debut in 2016, UPI has gathered a lot of momentum. Even more so, UPI has always been free for users. There are no additional transaction fees incurred on people for transferring money through it.
Every piece of technology comes with a cost. Up until this point, the government has partially subsidized UPI, and the remaining funds are barred by the Bank. However, as the demand for digital payments grows, more advanced infrastructure will be needed, which implies there is a significant likelihood that UPI transition fees may be levied in the future.
On the other hand, E-rupee is based on blockchain technology. It would require a dedicated article to precisely explain. Simply consider the digital rupee as a voucher that is electronically generated and when a purchase is made you redeem that voucher. This makes the transactions free of cost for consumers. However, because it is still a new technology, fewer people are familiar with how it works, which may discourage them from abandoning an established system.
It’s still too early to predict which technology will take the lead. Both UPI and E-rupee were introduced with separate frameworks and each has its special traits. Promoting a cashless economy, however, continues to be the driving force behind both of them. It is a clear indication that the future will be cashless.
If you want to understand the core technology and the future prospectus of E-rupee click here
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