eRupaya and PaySe: What RBI’s First Regulatory Sandbox Picks Hope To Do
Self-help group members in a Haryana village sitting together to make their loan repayments using PaySe’s offline payment device. (Image: Nucleus Software Exports)

eRupaya and PaySe: What RBI’s First Regulatory Sandbox Picks Hope To Do

Nearly a year after opening up the process of enrolling new financial technologies into its regulatory sandbox, the Reserve Bank of India has selected six products, two of which have initiated testing.

After facing a short delay on account of the Covid-19 pandemic, two of the six selected entities— Jaipur-based Natural Support Consultancy Services Pvt. (eRupaya) and New Delhi’s Nucleus Software Exports Ltd. (PaySe)—began testing their fintech products on Nov. 16, the RBI said earlier this week. It didn’t disclose the other four products that are yet to begin testing.

Even as the broader theme was “retail payments”, the banking regulator has chosen to focus on offline payment solutions for the unserved and underserved segments of the population in picking products for testing. While smartphone penetration in the country is rising, practical difficulties such as internet connectivity continue to hurt the spread of digital payments in rural areas. Offline payments are one way of overcoming those.

Enabling offline mobile payments is a critical step towards digitalising transactions in parts of the country that continue to grapple with intermittent internet access, said Fali Hodiwalla, partner—financial services consulting at advisory firm EY.

There exist a number of evolved technologies such as deferred payment authorisation, which can be leveraged to facilitate offline payment systems. Hence, promoting offline payments is directly aligned with the RBI’s and government’s objective of furthering both financial and digital inclusion in India.
Fali Hodiwalla, Partner - Financial Services Consulting, EY

Both eRupaya and PaySe offer wireless, contactless and offline payment services in rural areas, by making use of near field communication technology that works via radio-frequency identification chips. This eliminates the need for electricity, an internet connection or even a smartphone for executing point-of-sale transactions.

Also read: Offline Payments: The Next Big Push For Digital Transactions


Having started as a digital lending solutions provider for financial institutions, Nucleus Software has partnered with 150 banks and financial institutions across 50 countries over the last three decades, said Vishnu Dusad, managing director and co-founder of Nucleus Software. Its key product is the FinnOne Neo Platform, a digital retail loan servicing software.

PaySe, Dusad said, was born as an extension of their existing platform as the company looked to expand its user base in the remote parts of the country. “Moving in that direction, we launched PaySe with an aim to make a Rs 100 loan possible and profitable,” he said. “For that, we needed to bring down the cost of transaction significantly, while improving the accessibility of the solution.”

Launched as an offline and online digital cash solution, PaySe uses an NFC-enabled smart card that can be read on its device which accepts payments and stores electronic cash in the offline mode. The payment solution works without any bank account, and could also be used by financial institutions to disburse and collect loans from customers who don’t have smartphones or internet connectivity.

After being granted a prepaid payment instruments license by RBI in 2017, PaySe was initially rolled out as a solution for micro lenders and later adopted by the Haryana government as a payment solution for disbursing loans and collecting monthly repayments from self-help group members.

Today, it facilitates over Rs 100 crore in transactions for about 20,000 women across 120 villages in Haryana, Dusad said. BloombergQuint couldn’t independently verify the data.

“The validation of the banking regulator that would come if we succeed in the RBI’s regulatory sandbox experiment, would help boost the confidence in our product among state governments,” Dusad said. “It will also help us expand its usage for offering micro-credit.”


eRupaya is an offline prepaid payment solution designed by state-run Punjab National Bank in collaboration with its technology partner Natural Support Consultancy Services.

“The basic objective behind launching eRupaya was to facilitate transactions without a smartphone or a MasterCard, Visa or RuPay,” said Ripudaman Magon, director of Natural Support Consultancy Services.

“We plan to test our product under RBI’s regulatory sandbox, targeting at least 2,000 users per village across Rajasthan, along with a village in Gurugram,” he said.

The eRupaya prepaid card, which can be recharged to a maximum of Rs 2,000 per day and Rs 20,000 a month through PNB’s branches, ATMs, business correspondents, shops and other such counters, works using a mobile application or a device issued to shopkeepers for undertaking low-value transactions such as sale, refund and recharge.

Since its pilot launch in 2016 in the Bharatpur district in Rajasthan, the card has been used by about 1,000 villagers in over 22,000 digital transactions worth Rs 16 lakh, with a 100% success rate, according to data shared by Magon. BloombergQuint couldn’t independently verify the data.

“The regulator has asked us to focus on testing the product’s ease of use for customers, while ensuring data privacy and transaction security,” Magon said. “If the testing outcome is good, we’ll consider a wider rollout of eRupaya.”

RBI’s Evaluation Criteria

The testing of products/innovations by selected entities, according to the RBI’s framework for regulatory sandbox, will be overseen by its FinTech Unit, with participation of domain experts.

“The regulator has set certain key performance indicators for evaluating our product,” said Dusad. “This includes parameters such as the number of transactions per month, success rate of transactions, turn around time for complaints and reconciliation of failed transactions, customer dropout rates and their overall feedback.”

Further, the selected entities for the first cohort have been asked to submit progress reports every fortnight with on-ground data and assessment of the key performance parameters. “There may also be ground visits by regulatory officials to monitor the testing process.”

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