Can CBDC revolutionise India's payments space? Industry insiders debate
In a recent seminar organised by Tech Mahindra on Central Bank Digital Currencies, industry insiders debated on the challenges blockchain tech can possible encounter in India, and the way it will change India's payments system.
- Mar 3, 2022,
- Updated Mar 3, 2022 9:02 PM IST
The Reserve Bank of India's (RBI) Central Bank Digital Currency, or popularly known as CBDC, is the digital entity India Inc. is eagerly waiting for in particular because of its potential to revolutionise India's payments ecosystem. This might primarily have use cases surrounding government-driven initiatives, in areas such as agricultural subsidies, and so on, pointed out Tech Mahindra's S. Rajesh, who is the practice head at the firm's payments vertical.
Rajesh, and other industry experts, were speaking at a recent seminar organised by the Pune-headquartered IT major, titled “Digital Rupee- Dawn of New Payment Ecosystem."
He highlighted that although several other countries have adopted CBDCs, the use case is different for each country.
During her Budget speech last month, the Finance Minister Nirmala Sitharaman had said that this year the RBI would introduce a CBDC as India's first official digital currency. This move by the FM came after months of speculations from various industry experts about India's willingness to adopt blockchain technology. The CBDC, unlike a cryptocurrency which also uses the blockchain technology but is decentralised, would be tethered to the fiat version of India's rupee.
ALSO READ: Is Bitcoin replacing gold, oil to become 'Store of Value' of the digital age?
It is noteworthy to mention that China launched its digital currency to facilitate digital payments. Bahamas launched the Sand Dollar CBDC for financial inclusion because the banks were unable to reach a majority of the citizens on the sparsely populated but vast archipelago.
When asked if CBDC will overtake UPI, Ashutosh Sharma, Vice President and Research Director, Forrester, who was also a speaker at the seminar, told Business Today that he believes that both the payments technology would most probably co-exist, developing their own niche in the space.
It is noteworthy to mention that India’s UPI movement is widely considered a success with widespread adoption among both customers and businesses.
However, Sharma cautioned that just the introduction of blockchain will not solve the problems in India's payments space, and CBDC could, instead, also potentially complicate the ecosystem. ALSO READ: Crypto scams all around, here is how to avoid getting caught in one and keep money safe
“A lot of technological infrastructure needs to be built,” Sharma pointed out, highlighting the challenges CBDC might potentially face in India.
Nikhil Alulkar, Senior Vice President and Head - India SAARC, Tech Mahindra, argued that the introduction of CBDC would also bring into play the participation of tech companies, such as Tech Mahindra, in the era of payments, thereby driving up innovation and competition.
According to him, there would be five ways in which tech companies might facilitate the new age of payments. Firstly, he believes that tech companies would build the backend infrastructure, like high-speed Internet, blockchain, etc., to enable the CBDC. Digital ledgers like blockchain and high-speed Internet are fundamental requirements for it.
The second role he believes would be digitising banks to bring them up to pace with the requirements of CBDC transactions. This would help immensely in facilitating the onboarding process.
Thirdly, tech companies might help in fulfilling the regulatory requirements which would come up with the introduction of CBDC. Furthermore, he believes that tech firms would be required to build infrastructure to prevent cyber-attacks, since phishing scams, frauds, etc. are quite prevalent in the crypto space.
Lastly, he believes that tech companies would have a pivotal role in maintaining all the systems running, 24x7 for a country as large as India catering to over a billion people.
The Reserve Bank of India's (RBI) Central Bank Digital Currency, or popularly known as CBDC, is the digital entity India Inc. is eagerly waiting for in particular because of its potential to revolutionise India's payments ecosystem. This might primarily have use cases surrounding government-driven initiatives, in areas such as agricultural subsidies, and so on, pointed out Tech Mahindra's S. Rajesh, who is the practice head at the firm's payments vertical.
Rajesh, and other industry experts, were speaking at a recent seminar organised by the Pune-headquartered IT major, titled “Digital Rupee- Dawn of New Payment Ecosystem."
He highlighted that although several other countries have adopted CBDCs, the use case is different for each country.
During her Budget speech last month, the Finance Minister Nirmala Sitharaman had said that this year the RBI would introduce a CBDC as India's first official digital currency. This move by the FM came after months of speculations from various industry experts about India's willingness to adopt blockchain technology. The CBDC, unlike a cryptocurrency which also uses the blockchain technology but is decentralised, would be tethered to the fiat version of India's rupee.
ALSO READ: Is Bitcoin replacing gold, oil to become 'Store of Value' of the digital age?
It is noteworthy to mention that China launched its digital currency to facilitate digital payments. Bahamas launched the Sand Dollar CBDC for financial inclusion because the banks were unable to reach a majority of the citizens on the sparsely populated but vast archipelago.
When asked if CBDC will overtake UPI, Ashutosh Sharma, Vice President and Research Director, Forrester, who was also a speaker at the seminar, told Business Today that he believes that both the payments technology would most probably co-exist, developing their own niche in the space.
It is noteworthy to mention that India’s UPI movement is widely considered a success with widespread adoption among both customers and businesses.
However, Sharma cautioned that just the introduction of blockchain will not solve the problems in India's payments space, and CBDC could, instead, also potentially complicate the ecosystem. ALSO READ: Crypto scams all around, here is how to avoid getting caught in one and keep money safe
“A lot of technological infrastructure needs to be built,” Sharma pointed out, highlighting the challenges CBDC might potentially face in India.
Nikhil Alulkar, Senior Vice President and Head - India SAARC, Tech Mahindra, argued that the introduction of CBDC would also bring into play the participation of tech companies, such as Tech Mahindra, in the era of payments, thereby driving up innovation and competition.
According to him, there would be five ways in which tech companies might facilitate the new age of payments. Firstly, he believes that tech companies would build the backend infrastructure, like high-speed Internet, blockchain, etc., to enable the CBDC. Digital ledgers like blockchain and high-speed Internet are fundamental requirements for it.
The second role he believes would be digitising banks to bring them up to pace with the requirements of CBDC transactions. This would help immensely in facilitating the onboarding process.
Thirdly, tech companies might help in fulfilling the regulatory requirements which would come up with the introduction of CBDC. Furthermore, he believes that tech firms would be required to build infrastructure to prevent cyber-attacks, since phishing scams, frauds, etc. are quite prevalent in the crypto space.
Lastly, he believes that tech companies would have a pivotal role in maintaining all the systems running, 24x7 for a country as large as India catering to over a billion people.