What is the Difference Between Digital Rupee and UPI?
What is a Digital Rupee?
In the dynamic landscape of India's digital payment ecosystem, two key players take center stage: Digital Rupee and Unified Payments Interface (UPI). Both these components play vital roles in steering the nation towards a future devoid of cash transactions. This blog aims to unravel the disparities between Digital Rupee and UPI, shedding light on their distinct functions within the ever-evolving digital finance realm.
Understanding Digital Rupee
Digital Rupee stands as the electronic incarnation of the Indian Rupee, specifically tailored to simplify online transactions, rendering them more accessible and convenient. Spearheaded by the government, this initiative guarantees a secure and straightforward approach to conducting digital transactions using the traditional currency.
Centralisation and Control
In contrast to the decentralised nature of UPI, the Digital Rupee operates within a regulated, centralised infrastructure. The Reserve Bank of India (RBI) oversees the issuance and circulation of the Digital Rupee, a fact that may raise concerns related to privacy and monitoring.
Applications of Digital Rupee
- Cross-border Trading: By eliminating intermediaries, Digital Rupee simplifies cross-border trading.
- Government Grants and Benefits: Facilitates direct transfers of government grants and benefits to digital wallets, reducing leakages.
- Economic Transparency: Encourages digital transactions to mitigate black money and enhance economic transparency.
What is Unified Payments Interface – UPI?
Unified Payments Interface, commonly known as UPI, is a revolutionary payment system developed by the National Payments Corporation of India (NPCI). This system enables instant money transfers between bank accounts through smartphones, functioning seamlessly for both peer-to-peer and merchant payments, thereby supporting real-time interbank transfers.
Decentralisation and Control
Unlike the Digital Rupee, UPI operates on a decentralised network. While NPCI manages the system and establishes rules, various banks and payment apps handle UPI transactions. This decentralised approach provides users with multiple options, fostering flexibility and diversity in the digital payment ecosystem.
Use Cases of UPI
- Peer-to-Peer Payments: Facilitates easy money transfers between friends and family.
- Merchant Payments: Enables businesses to receive swift and easy digital payments using UPI QR codes.
- Online Shopping:Streamlines online shopping with an expedited checkout process, eliminating the need for entering card details.
Difference Between Digital Rupee and UPI
Nature
Digital Rupee assumes the digital form of the Indian Rupee, maintaining an equivalent value to physical currency. On the other hand, UPI operates as a payment system, facilitating immediate transfers between bank accounts.
Issue Authority
Digital Rupee finds its origins and regulation in the central authority, RBI. Conversely, UPI was created by NPCI and operates on a decentralised platform involving multiple banks and payment service providers.
Scope of Use
While Digital Rupee aims to digitalise all aspects of the monetary system, including international trade and government benefits, UPI primarily focuses on peer-to-peer and merchant payments within the nation.
Centralisation vs. Decentralisation
While UPI provides flexibility and choice through its decentralised platform, Digital Rupee operates within a controlled infrastructure, ensuring security and control.
In conclusion, both Digital Rupee and UPI play pivotal roles in India's digital payment revolution, each offering unique features and benefits. UPI facilitates real-time transactions between banks in a decentralised manner, while Digital Rupee serves as the government-backed digital rendition of the national currency. A comprehensive understanding of their disparities is paramount for maximising their potential and steering India towards a more inclusive, cashless future in the digital era.
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