The e-Rupi could take us a long way towards financial inclusion

Synopsis: The payment-voucher system’s (e-RUPI) features make it ideal for programmes aimed at bridging the digital divide in India.

How has India progressed wrt digital payment ecosystem?

India has emerged as a leader in digital payments, with a manifold increase in such transactions in recent times. There are not many countries that allow digital transactions worth as low as one rupee.

The Universal Payments Interface (UPI), which was launched in 2016 to allow payments round the clock 365 days a year, has been very successful.

Recently, the UAE became the third country after Bhutan and Singapore to accept UPI payments outside India, which is an indication of the ease and efficiency of this system.

What is hampering India’s vision of financial inclusion?

Despite a vibrant digital payment network, financial inclusion faces some bottlenecks in India:

Rural-urban divide both in terms of technology and access to banking infrastructure. For instance, a large gap still exists in terms of internet access. As per the latest data available from TRAI, there are 34.6 rural internet subscribers per 100 people in the country, as opposed to 104 in urban areas (as on end December 2020).

Digital disparity among states: Internet penetration also varies widely across states. Internet subscribers per 100 persons ranges from 210 in Delhi and 87.6 in Punjab to 40.8 in Uttar Pradesh and 32.9 in Bihar.

Inadequate banking facility to rural areas: Further, of the country’s total bank branches, 33.5% are located in rural areas, 27.5% in semi- urban, 19.3% in urban and 19.7% in metropolitan zones, as on end-June 2021. There are around 190 million unbanked citizens in our country, residing mostly in rural parts.

As the existing digital payment methods require a bank account and internet/smartphone, until these gaps are filled, complete financial inclusion will remain a developmental challenge.

What is M-pesa and how it helped to tackle the issue of financial inclusion?

Most developing countries face similar challenges, and some of them have successfully tackled these through the innovative use of technology.

One such example is M-Pesa in Kenya, where ‘M’ stands for mobile and ‘Pesa’ for money. M-Pesa was introduced in Kenya as an initiative for financial inclusion geared towards its unbanked or under-banked population.

This is a virtual banking system that provides services through a SIM card with no requirement of internet access and bank accounts. It started as a means to buy airtime and make micro-loan repayments using the network of Safaricom airtime resellers.

M-Pesa later expanded to many other counties, and over time, it became a big player in the market for transferring or withdrawing money, saving or borrowing money, making merchant payments and paying bills.

Transactions worth half of Kenya’s gross domestic product are carried out over M-Pesa, as reported by its central bank, and this platform claims over 49 million customers across Africa.

How e-RUPI, similar to M-Pesa, can become a game changer for India?

Similar to what M-Pesa did in Kenya, e-Rupi has the potential to significantly boost financial inclusion in India. It is a solution to the twin problem outlined earlier.

No need of an internet connection: The e-Rupi system allows transfers of purpose- specific prepaid vouchers that need no debit card, credit card, mobile bank application, internet connection, etc, to be used. As envisaged, all that a person would need is a mobile number.

An e-Rupi voucher will be sent to the user as an SMS (for non-smartphone users) or QR Code (for smartphone users). This will enable particular digital payments, not just from phones to digital recipients, but also from digital senders to offline payees.

This contactless payment system is expected to be easy, safe and secure, as it promises to keep the details of beneficiaries completely confidential. The entire process is both reliable and fast, as these vouchers are preloaded with money.

Further, e-RUPI could be developed further to serve various other ends as well. The decision of Mswipe to include e-Rupi as a mode of payment, for example, is a step towards building a financial ecosystem based on it.

Source: This post is based on the article “The e-Rupi could take us a long way towards financial inclusion” published in the Live Mint on 7th September 2021

Other areas of application of e-RUPI: Read from here: https://forumias.com/blog/how-e-rupi-can-transform-governments-welfare-schemes/