How will digital voucher payment system work?

What is the e-RUPI platform for walfare services? Will it be leak-proof and stop misuse of funds?

The story so far: On August 2, Prime Minister Narendra Modi launched a new digital payment system to send the government’s monetary benefits directly to beneficiaries’ mobile phones. The e-RUPI platform, developed by the National Payments Corporation of India (NPCI), the De- partment of Financial Services, the National Health Auth- ority and the Ministry of Health and Family Welfare, is said to be leak-proof’ and offers non-transferable monetary service to citizens.

The e-RUPI system is accessible to anyone with a mobile phone, even if the recipient does not have a bank account. It comes in the form of one-time use e-vouchers to access government health services. It could gradually be implemented to cover welfare services a be- neficiary is already receiving from different government agencies. 

What is the need for this?

The e-RUPI is a digital voucher that can be redeemed by beneficiaries to avail themselves of a specific service. The digital platform does not require a card, app or internet access to redeem an e-voucher. The e-vouchers can be issued by the government or private entities to the benefici- aries through QR codes or long-string SMS.

The service is aimed at plugging holes in the existing welfare payment disbursement system. “The idea here is to track and trace how the subsidies and benefits given to citizens are used,” Mihir Gandhi, partner at PwC, told The Hindu, Secondly, with e-RUPI, government agencies can keep track of how much of the allocated funds have been disbursed to citi- zens. Otherwise, carrying out reconciliation for unused subsidies could be an accounting “nightmare for the go-

A Harvard University study of 2018 found that even among men, only 71% owned a cell phone, essential to access digital services like e-RUPI vouchers. Online data portal Statista pegged India's smartphone penetration rate at 42% in FY2020

How does e-RUPI work and where can it be used? 

The contactless prepaid payment system can be issued by both government agencies and corporate entities to a specific individual to avail a targeted service. The Union government plans to use e-RUPI for its CO-VID-19  vaccination drive for citizens and gradually implement it as part of other govern- ment schemes.

To be- gin with, the NPCI has with more than tied 1,600 hospitals where be deemed. The transac- tion begins with a QR code or a long-string SMS pushed into a be- neficiary’s mobile dev- ice. The beneficiary will then need to show it to the welfare service provider to authenticate the transaction. Citizens do not have to carry any printout, and as these vouchers are created for a spec- ific purpose, they cannot be transferred or cashed out.

e-RUPI is powered by the NPCI’s UPI platform, and the service has authorised 11 banks to issue digital vouchers. These include both private and public banks. Beneficiaries will be identified by their mobile numbers, and the e- vouchers will be sent to their phone through the bank’s voucher management system.

The digital voucher can only be issued by a  government agency or a corporate entity it cannot be issued by one person to another.

Is it a digital currency?

The e-RUPI is built for a specific transaction to avail a ser- vice at a particular welfare centre. The digital vouchers have a one-time use case and they can’t be transferred. This puts e-RUPI within a voucher-based payment system rather than a virtual currency.

But the government’s move could be a good starting point to experiment with digital currency. “It can be a preamble to a digital currency, but it may not directly be the platform that is used for the digital currency because UPI will be the overlay on top and below it can be actual or digital currency,” Mr. Gandhi said.

What are some of the challenges in implementation?

A 2018 research by Harvard University revealed a 33-per- centage point gender gap in mobile phone ownership in India. In their study titled A tough call: Understanding barriers to and impacts of women’s mobile phone adop- tion in India,’ the authors point to the economic and nor- mative barriers as important drivers of the mobile gender gap.

They also note that the disparity exists across Indian society, and is not limited to rural, less educated or poorer groups. In the same study, even among men, only 71% owned a cell phone, an essential device to access digital schemes like the e-RUPI vouchers.

Online data portal Sta- tista pegs India’s smartphone penetration rate at 42% in the financial year 2020 and estimates it to reach 51% by 2025. Closing the mobile gender gap and enabling a large proportion of citizens to own a mobile phone will remain a problem to be solved.