Token Money at Stores: Pilot Learnings

What Token Money Means for Everyday Users

India’s journey toward digital currency didn’t stop at the e₹. In 2025, RBI and select banks began testing a new form of token money — digital representations of bank deposits that behave like cash. Under Rbi Token Money Framework, these tokens are issued by banks but backed one-to-one by actual deposits.

Unlike CBDC (which is issued directly by RBI), token money sits in your regular banking ecosystem. It’s digital cash created by banks, transferable instantly between wallets, and usable offline. For users, it feels like UPI — but with a twist: no interbank routing, no settlement lag, and no dependency on internet availability during payment.

The pilot, which began in mid-2025 across Mumbai, Bengaluru, and Delhi, let users shop using tokenised balances loaded into partner apps like HDFC Pay and Axis SmartWallet.

Insight: Token money behaves like digital cash — spendable, storable, and instantly final, just like handing over a ₹100 note.

How the RBI’s Retail Pilot Actually Works

The token money system combines bank-issued tokens with payment rails similar to UPI and CBDC. As described in Tokenised Bank Deposit Model, each participating bank converts a portion of a user’s deposit into digital tokens stored in a secure mobile wallet.

Here’s how it works step-by-step:

1. Step 1: User opts into the pilot via their banking app.
2. Step 2: Funds are converted to token form — for example, ₹500 in deposits becomes ₹500 in digital tokens.
3. Step 3: The tokens are stored locally on the user’s device or cloud wallet.
4. Step 4: At a store, users tap or scan to pay, transferring tokens directly to the merchant’s wallet.
5. Step 5: Both parties receive instant confirmation — no interbank delay or reconciliation required.

The tokens are programmable, meaning they can include rules (like expiry or merchant restrictions), which gives RBI new ways to manage liquidity and retail flows. However, in the pilot, programmability was kept minimal to test user adoption first.

Tip: Token money isn’t crypto — it’s bank-backed digital cash that never leaves the regulated system.

What Retailers and Users Learned from the Trials

Through Digital Rupee Pilot Insights, the RBI pilot revealed several interesting behavioural and operational insights. Most users loved the speed and “cash-like” simplicity — no failed UPI links or PIN timeouts. But some early friction points also surfaced.

Key findings from the pilot:

• High acceptance rate: Over 85% of pilot users preferred token payments for offline and low-value purchases.
• Low failure rate: Transaction success exceeded 99%, far higher than UPI under weak network zones.
• Merchant ease: Small retailers appreciated instant settlement with no MDR (merchant discount rate).
• Awareness gap: Many users confused token money with CBDC or UPI balance, showing need for education.
• Device dependency: Some wallets required the same device for both payer and receiver — limiting flexibility.

Interestingly, merchants in Tier-2 towns reported the highest satisfaction, as they experienced fewer delays and no reconciliation headaches. For banks, it meant reduced backend load and faster retail clearing cycles.

Insight: Token payments are proving that “digital” can feel like cash — frictionless, final, and private.

What’s Next for Token Money in India

RBI and participating banks are now analysing pilot data under Future Of Digital Cash India. The next step is interoperability — ensuring a token from Bank A works seamlessly in Bank B’s ecosystem, much like UPI handles interbank transfers today.

Planned next-phase upgrades:

1. Cross-bank tokens: Enable interoperability via NPCI’s Digital Currency Switch.
2. Offline expansion: Extend pilots to Tier-3 towns and remote locations with limited connectivity.
3. CBDC bridge: Integrate token money with RBI’s digital rupee for hybrid use.
4. Smart contracts: Enable programmable use cases — loyalty, subsidies, or restricted-use benefits.

For India’s fintech ecosystem, token money could bridge the last gap between bank deposits and digital currency — a move that makes everyday digital payments faster, safer, and more inclusive. While full rollout may take until 2026, early signs suggest strong public and merchant appetite for tokenised payments.

Tip: The RBI’s token model could soon make every rupee — physical, digital, or tokenised — instantly usable anywhere.

As India leads in UPI and now explores token money, its next innovation may redefine how digital cash actually moves — not through apps or cards, but as value itself.

Frequently Asked Questions

1. What is token money in India?

It’s a digital form of bank deposits converted into transferable tokens — spendable instantly like cash but backed by your bank.

2. How is token money different from CBDC?

CBDC is issued by RBI, while token money is created by banks under RBI regulation and backed by deposit balances.

3. Can I use token money offline?

Yes, in select pilot zones. Tokens can be exchanged between devices using NFC or Bluetooth without the internet.

4. Do merchants need new infrastructure?

No. Token payments use QR and tap systems similar to UPI and don’t charge merchant fees.

5. When will token money launch nationwide?

RBI plans wider rollout in 2026 after ensuring interoperability and safety across all banks.