UPI QR Code-Central Bank Digital Currency interoperability

UPI QR Code-Central Bank Digital Currency interoperability

News: Several Indian Banks have enabled the interoperability of Unified Payments Interface’s (UPI) Quick Response (QR) code with their central bank digital currency (CBDC).

Background:
• This integration allows users of the retail digital rupee to perform transactions by scanning any UPI QR code at a merchant outlet, simplifying payments for customers and merchants.
• The move aims to increase the adoption of the digital rupee by leveraging the widespread use of UPI.

What is Digital Rupee?
• The digital rupee, issued by the RBI, is a tokenized digital version of the rupee, stored in a digital wallet linked to a customer’s savings bank account.

What is Interoperability?
• UPI QR code-CBDC interoperability  All UPI QR codes are compatible with CBDC apps.
• Interoperability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems. It allows system providers and participants in different systems to undertake, clear and settle payment transactions across systems without participating in multiple systems.
• Interoperability between payment systems contributes to achieving adoption, co-existence, innovation, and efficiency for end users.
• Interoperability of the two payments can be made using a single QR code.

What are benefit of recent move?
• It will ensure seamless transactions between a customer and merchant without having the need to switch between multiple digital platforms..
• It will allow a digital rupee user to make payments for their daily needs, such as groceries and medicines, by scanning any UPI QR codes at any merchant outlet.
• Currently, UPI is a widely used payment method, and the interoperability between it and the CBDC will propel the adoption of the digital rupee.