Key differences between UPI and Digital Rupee

Today, most financial transactions are made using the United Payments Interface (UPI). This system facilitates the end-user to make payments swiftly from the UPI app itself through their smart device. Since India is in the process of going completely digital, the government has lately added a new payment version to the existing methods, i.e., the digital rupee. 
Just like people use cash as a source to trade goods and services, likewise, digital rupee can be used for the same purposes. People can use the digital rupee for paying for purchases made online or offline. This method acts like a wallet where one can make payments and do transactions instantly. 

The digital rupee, also known as  Central Bank Digital Currency (CBDC), will be available for users to start using effectively from February 1, 2023. The RBI issues and oversees the functioning of this new token.  

Key Differences Between UPI and Digital Rupee

Now that you have understood the basics of UPI and the Digital Rupee, let’s walk through the key differences between the both.

1. In UPI, the banks act as a gateway or a channel for payments, but when it comes to the digital rupee, the payments are done from one wallet to another. Here, banks don't get involved, but it’s otherwise in the UPI. 
2. UPI payments are made via sources like Google Pay, PhonePe, NEFT, and RTGS, etc. In the digital rupee, the payments are done electronically.
3. Settlements can be done immediately by using the digital rupee and they possess a store of value. But UPIs don’t do that as they are merely an infrastructure made to process the payments. 
4. In UPIs, you can’t withdraw the funds and store them in your wallet for future use. However, that’s absolutely possible in the digital rupee, making it a one-stop solution for all sorts of payments, both online and offline.
5. The UPI payment system works similarly to debit cards and credit cards, whereas, the digital rupee is like a “cash form” where one can withdraw and spend or can store it like a deposit in their wallet.
6. Payments made via UPI involve middlemen, hence the indirect route of transferring money. In digital rupee, the payment is done directly, and there’s no middlemen involved here.