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.
UPI payments are made via sources like Google Pay, PhonePe, NEFT, and RTGS, etc. In the digital rupee, the payments are done electronically.
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.
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.
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.
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.