Mint Explainer | Fintechs launch CBDC wallets: Is RBI’s e-rupee set to take off?

The RBI had then said that the move is expected to enhance access and expand choices available to users apart from testing the resiliency of the CBDC platform to handle multi-channel transactions. But will the entry of these fintechs help increase awareness about how to deploy e-rupee and promote usage of CBDC wallets?

CBDC wallets

After the central bank enabled CBDC issuance for third-party application providers (TPAPs), platforms such as CRED and MobiKwik, in collaboration with the RBI and Yes Bank as the sponsor bank, have rolled out versions of e-rupee wallets for select users.

The idea behind allowing fintechs to offer e-rupee wallets is to combine the trust and safety of a sovereign currency with the frictionless and superior payments experience offered by TPAPs, reduce cash in circulation and drive financial inclusion.

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It aims to broaden CBDC’s reach beyond existing digital wallet users to a more extensive and diverse user base. It also looks to foster collaboration between banks and fintechs to enhance accessibility and user engagement, according to industry experts.

Bank wallets vs fintech wallets

Bank-backed CBDC wallets are developed and maintained directly by the banks, ensuring direct oversight and integration with the lender’s existing infrastructure. In contrast, TPAP wallets are offered by fintech companies in partnership with sponsor banks—in this case Yes Bank.

While both the e ₹ and UPI (Unified Payments Interface) facilitate digital transactions, they operate differently. UPI serves as a platform enabling real-time transfers between bank accounts, whereas the e ₹ is a digital representation of sovereign currency issued by the RBI. As of June, the retail CBDC pilot in India had onboarded approximately 5 million customers and 420,000 merchants.

“This model allows fintechs to leverage their user-friendly interfaces and innovative features, while the sponsor bank ensures regulatory compliance and liquidity management. This partnership approach combines the agility of fintech’s with the stability of traditional banks,” said Kriti Gupta, practice director at Everest Group, a US-based global research firm.

“Transactions with the e ₹ involve the transfer of digital currency between wallets, potentially offering features like offline transactions and enhanced privacy. The integration of e ₹ wallets with UPI combines the advantages of both systems, providing users with a versatile and efficient payment experience,” Gupta added.

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CRED, a rewards payments platform that targets affluent and creditworthy customers, has launched a beta version of e-rupee wallet allowing users to send and receive funds from other CBDC wallets as well as bank accounts linked to UPI. MobiKwik, the country’s largest digital wallet, has gone live with a full-scale production version of the e ₹ wallet, which also allows peer-to-peer (P2P) and peer-to-merchant (P2M) transactions.

After completing video KYC, users can create and load their e-rupee wallets via UPI. Currently, the e-rupee wallet supports transactions up to ₹10,000 per transfer and a daily limit of ₹50,000, and storage up to ₹1 lakh in all e-rupee currency denominations of up to ₹500.

E-rupee uses

An industry expert compared regular digital payments to using a remote control and e-rupee to having a smartphone. This would mean paying bills exactly when they’re due, setting spending limits that adjust based on salary or creating special savings that can only be used for specific purposes like education or healthcare for all retail users that use e-rupee, not just those of specific payment applications or banks.

For merchants, banks and other institutions, potential use cases may include smart contracts with programmable money such as programming refunds or cashbacks to be used for specific transactions.

“Just like how your phone now has built-in features that we once needed separate apps for, e-rupee builds advanced money features right into the currency itself,” the expert said, adding that this paves the way for innovative financial services.

A spokesperson for CRED told Mint that the e-rupee wallet has been rolled out to all beta users of the Android application, and future updates will “enable programmable merchant payments, CRED Pay integration and PIN-less transactions below ₹500.”

Future use cases are expected to be in the realm of expansion of digital payments for instant P2P and P2M money transfers without requiring a bank account, encouraging internet-free and remote transactions, cheaper and faster cross-border and remittance payments, and programmable money and smart contracts wherein fintechs can design conditional payments such as for specific subsidies like LPG purchases or employee food coupons.

Future of e-rupee

Both the platforms are focusing on users that regularly engage with their app and that of Yes Bank, especially who are digitally or tech savvy, creditworthy and early adopters of new technologies. The platforms are also planning to launch various campaigns to increase awareness and adoption among members as e-rupee usage grows.

MobiKwik said it said rolled out targeted campaigns via digital and email marketing and in-app promotions to reach specific demographics or user groups that are more likely to be interested in CBDC. Additionally, targeted incentives, merchant education and partnerships with FMCG and supply chains are also expected to drive ecosystem-wide acceptance.

“Fintechs excel at scaling B2C products by focusing on proven methods of discoverability, user experience, and educating users about new offerings. Will this take time? Yes,” a spokesperson for MobiKwik told Mint.

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The focus on customer use cases may incentivize increased usage, but the true success of the digital currency will be only when it becomes a cost-effective model for bank and fintechs alike, according to experts.

Everest Group’s Gupta said that fintechs assessing the cost structures of operating CBDC wallets will need to consider factors such as investing in robust and technology infrastructure, compliance and regulatory costs, including regular audits and updates to security protocols, and customer education and support to facilitate adoption.

The MobiKwik spokesperson said that while currently fintechs do not generate direct revenue or fees from offering CBDC as it has deemed as a ‘public good rather than a revenue-driven service,’ fintechs stand to benefit in indirect ways such as increased user engagement, higher transaction volumes, deeper customer relationships and driving adoption of other financial products.

“By integrating CBDC into their platforms, fintechs can enhance user stickiness, drive adoption of other financial products, and strengthen their role in the evolving digital payments ecosystem,” they added.