The Reserve Bank of India (RBI) on June 17 announced a blue print for regulation of payment systems that aims to provide users with fast, accessible and affordable e-payment options.
Under the vision 2025, the RBI announced regulation of BigTech and FinTechs, buy-now-pay-later (BNPL) systems and introduction of a central bank digital currency (CBDC), among others.
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“The Payments Vision 2021 had envisaged to empower every Indian with access to a bouquet of e-payment options that is safe, secure, convenient, quick and affordable, and had set four goalposts of Competition, Cost, Convenience and Confidence with 36 specific action points and 12 expected outcomes,” the central bank said in a release.
Adoption of digital payments was growing before the onset of the COVID-19 pandemic, but steps taken by the RBI along with additional thrust provided by the pandemic have accelerated the shift, leading to a dramatic increase in contactless and online payments, the monetary authority added.
For all organisations that rely on or are in the payments ecosystem, effective digital payments strategy and operations are fundamental, it added.
The central bank noted that BigTech and FinTech companies are actively expanding their scope of business from initial on-boarding of customers for facilitating payment transactions to becoming participants of payment systems and thereafter providing a host of financial services.
Given their increasingly dominant role in payments ecosystem, a discussion paper on the need for proportionate regulation by the RBI encompassing domestic incorporation, reporting, data use, etc., shall be published, it said.
Earlier on June 17, the RBI Governor Shaktikanta Das had said that the entry of BigTech and fintech firms into the financial sector can create systemic concerns, including those pertaining to overleverage.
Further, the vision stated that BNPL services have developed into a new payment mode alongside the existing payment modes like cards, Unified Payments Interface (UPI), and net banking. This channel, facilitated by a few payment aggregators, leverages the existing nodal account (escrow account after authorisation) to route payments between BNPL customer and a merchant.
This novel method shall be examined, and issuance of appropriate guidelines on payments involving BNPL shall be explored, it said.
On central bank digital currency, the RBI said that it is also an area of interest to enhance cross-border payments.
The RBI is working towards introduction of CBDC in India. Various use cases shall be studied and explored to bring in further efficiencies in domestic and crossborder payment processing and settlement using CBDCs, the central bank said.
In the process, RBI expects volumes of cheque-based payments to reduce to less than 0.25 percent of total retail payments, and see a more than three times increase in the number of digital payment transactions in the country.
The regulator expects the Unified Payments Interface (UPI) to register average annualised growth of 50 percent and IMPS (Immediate Payment Service) and NEFT (National Electronic Funds Transfer) a growth of 20 percent going forward. UPI currently accounts for 60 percent of India’s retail digital payments in terms of volumes.
For card payments, RBI expects debit card transactions at Point of Sales (PoS) to increase by 20 percent and card acceptance infrastructure to increase to 2.50 crore. Pre-paid instrument transactions are expected to rise by 150 percent, it said.
