As part of its effort to promote the adoption of CBDC, Bank of Baroda has started to trial the utilization of CBDC in the reward and rebate programs for small and medium-sized merchants. This initiative was developed with the collaboration of the Reserve Bank of India and this paper aims to explore how retailers can design and deliver rewards to consumers using CBDC. This has opened up the ability to design and deliver rewards to customers in a way that had only been available to large corporations in the past.
Any small shop that has an account with Bank of Baroda and has registered for the app can offer the cashback without having to put in place other mechanisms. They can design the strategies to trigger the campaigns by the frequency of the campaign, the percentage of cash back, and the expiry date of the campaign. The digital rupee by the bank can only be spent as CBDC programmable money at the merchant that issued it through the bank’s digital rupee app and can only be spent once before it expires.
The programmability of CBDC makes it possible for firms to incorporate unique features such as restricting the use of funds to their business or only offering discounts on certain products. The goal of this feature is to increase customer interaction and bring them back to the store to make another purchase.
The Chief Executive of Bank of Baroda Sanjay Mudaliar said, “Our ‘Merchant Loyalty/Cash Back Programme’ on the programmable CBDC baseline is a first in the Indian banking sector and enables small merchants to design tailored cash back offers for customer retention and interaction.”
The project is expected to further the progress of CBDC and at the same time make digital payments more attractive for both merchants and consumers. Thus, Bank of Baroda is contributing to the improvement of small business development by integrating loyalty programs into the digital payment system.
