ToneTag and IDFC First Bank collaborate to introduce CBDC Payments
- ByStartupStory | February 1, 2023
To enable acceptance of digital rupee at retail locations, IDFC FIRST Bank has teamed with ToneTag, a provider of proximity and voice technology solutions globally. The Reserve Bank of India previously conducted a test rollout of Central Bank Digital Currency (CBDC) for retail consumers (RBI).
A month after testing the wholesale CBDC, the RBI began a retail digital rupee (e-R) experiment with four banks in four locations, including IDFC FIRST Bank, on December 1.
Users will be able to conduct transactions through a digital wallet provided by participating institutions. As part of the pilot, the digital money is issued in the same denominations and distributed through financial intermediaries.
Similar to “cash,” the CBDC will primarily be utilised for retail payments. It will be a digital rupee (e-R) that represents legal tender and is distributed through middlemen, namely banks. It will be issued in the same denominations as paper money and coins. According to the RBI, users will be able to conduct transactions with e-R using a digital wallet provided by the participating banks and kept on mobile devices or hardware wallets to facilitate P2P and P2M transactions. The e-R will still provide physical cash’s security, dependability, and finality of settlement attributes. Similar to cash, it won’t accrue interest and can be changed into other types of payment like deposits with banks.
Madhivanan Balkrishnan, COO, IDFC FIRST Bank, said, “This solution will change how merchants transact, and IDFC FIRST Bank is a proud partner in this collaboration. Digitization of cash payments is one more step in making transactions easier for our customers. As a bank that firmly believes in ‘Customer First’ approach this initiative aligns well with the same.”
Kumar Abhishek, founder & CEO ToneTag, said, “We are glad to collaborate with IDFC First Bank and participate in the first phase of CBDC retail pilot. In this pilot ToneTag will provide solutions through which merchants will be enabled to accept digital currency. With this launch India becomes one of the only few countries Globally to take this leap of digitizing cash and reap its great potential to reduce counterparty credit and liquidity concerns, as well as increase the efficiency of payments and securities settlement. This indeed is going to be India’s decade and many kudos to RBI.”
The main motivations for considering the issuance of CBDC in India, among others, include the need to lower operational costs related to managing physical cash, advance financial inclusion, boost the innovation and resilience of the payments system, boost the efficiency of the settlement system, encourage cross-border payment innovation, and provide the general public with access to the benefits that private virtual currencies can provide without the associated risks.
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