UPI and CBDC (Digital Rupee) are two distinct payment systems that have experienced significant surges in popularity in recent times. Each of the two payments has advantages and disadvantages.
This document covers
In India, RBI is still exploring the Digital currency option and it might take some considerable amount of time to launch digital rupee in India
|CBDC Digital Currency
|Unified Payments Interface
|Central Bank Digital Currency, a form of Digital Currency, aka eRupee (e₹)
|NPCI (National Payments Corporation of India)
|RBI (Reserve Bank of India)
|Inter bank peer-to-peer (P2P) transactions and Person-to-Merchant transactions (P2M)
|CBDC from one digital wallet to another or A rupee amount from a bank account into a digital wallet in the form of CBDC tokens
|Devices to have
|No denomination as such; in increments of Rs. 1
|e₹2, e₹5, e₹10, e₹20, e₹50, e₹100, e₹200, e₹500, e₹2,000^
|Money transfer between Wallets, Purchases, Gifts
|Money transfer between Wallets, Purchases*, Gifts*, FDs*, Investments*, commercial paper*
|Internet / Network
|Internet not needed at the time of Wallet Transfer
|Transaction Processing Times
|Close to Real-Time Payments
|Composite Transaction across Banks, UPI Networks, Mobile Networks
|Blockchain ledger is maintained
|Used in US, and few other countries for NRIs on a pilot basis.
|Scope for international use but may take time to implement.
|Form of Currency
|No Physical Form, All Digital
|No Physical Form, All Digital. Unlike UPI, Currency is represented in tokens and is very similar to physical currency, except in digital form.
|Operational and Very Successful
|Ongoing Pilot mode across 13 banks in India
|Well Accepted; Anyone with a smart phone and a bank account can start using.
|In Pilot mode; expected to accept where UPI is being accepted. Available in both Retail CBDC and Wholesale CBDC
|Why to use?
|UPI is only interface that is quick, easy, secure and scalable at this time.
|CBDC can also work in remote places where there is no internet, though you need the network from time to time.
|Cost to Use
|UPI when used for business, the payment gateways charge 2.5% of the transaction amount, which is very high compared to Physical Rupee Note.
|CBDC Digital Rupee is controlled by RBI and is expected to have no to low transaction cost for businesses. Remember, there is no intermediary required for CBDC.
|UPI is well accepted but the MDR fees of 2.5% from the payment gateways make the public loose 2.5% for every transaction. Absolutely un-acceptable, hope the Govt of India will remove MDR fees in future.
|CBDC unlike UPI is a stored tokens that can be used without any MDR fees while transacting. There are rumors that CBDC in it's final form comes with a currency expiration.
* Expected in near future (as on Jan 2024). ^ Usage is yet to be confirmed.
Each of the two payment methods has its own benefits and drawbacks. When deciding between CBDC and UPI, security, speed, acceptance, maintenance fees, and other considerations come into play. CBDC provides a higher level of security in comparison to UPI due to its central bank operation. The merchants' adoption of CBDC may require a slightly longer duration when compared to UPI.
In the end, it is the individual's choice, contingent on the situation at the moment of payment.