Mumbai, 24 September 2019
by Satakshi Chopra
Digital payments are evolving in leaps and bounds. With the frequency of digital transactions snowballing every year in India, Reserve Bank of India, India’s central banking institution aims at making digital payments safe, secured, efficient and inexpensive for everyone. RBI’s Vision document, since 2002, has been setting guidelines on how to develop and enhance the payments and settlement systems in India. Ever since, RBI’s Vision has put emphasis on the factors like innovation, cyber security, financial inclusion, customer protection and competition.
The Vision 2018 focused on establishing four strategic pillars of digital payments to promote a less-cash India. This included building a payment acceptance and settlement system by providing responsive regulation, robust infrastructure, effective supervision, while putting customer in the center.
In 2018, Digital Payments transaction turnover vis-à-vis GDP showed massive surge of 8.42 when compared to 7.85 and 7.14 in 2017 and 2016. Post inclusion of Clearing Corporation of India Limited and paper, the increase in GDP has been 15 in Financial Year 2018 in contrast with 14.73 (Financial Year 2016-17)
Aiming at a ‘cash-light’ society, Vision 2021 focuses on empowering every citizen by providing them a bunch of digital payment options that are safe, secured, affordable and convenient. To bring this to reality, Vision has adapted a two-pronged approach,
a) Providing exceptional customer experience
b) Enabling an ecosystem and infrastructure which will result in the following customer experience.
This will also entail empowered payments for Service Operators and Service Providers. It also aims at reducing per transaction cost for the customers while keeping in view the marginal cost investment.
Covering a period up to December 2021, RBI has enumerated that Vision would produce:
1. Decrease in the volume of cheque-based payments by 2% of the total retail electronic transactions.
2. Average annualised growth is predicted in payment systems like UPI and IMPS up to a 100% and 40% in NEFT. The number of digital transactions is also expected to soar up to 8707 crores in December 2021.
3. The turnover of digital payments transaction vis-à-vis GDP is expected to grow by 10.37 in 2019, 12.29 in 2020 and 14.80 in 2021.
4. 35% increase in debit card transactions at POS for purchase of goods and services. This would lead to a growth of almost 44% in the usage of debit cards (both ATM and POS).
5. The card acceptance payment infrastructure PAN India is expected to witness an increase in its deployment with a substantial portion taking care of processing contactless card payments. The upscale is anticipated to be six times of the present levels with at least 5 million POS by the end of 2021.
6. The increase in mobile based payment transactions is predicted to increase by 50%.
7. A reduction by at least a 100 basis points is estimated in the pricing of the electronic payment systems and a shift from transaction-value-percentage rate to per-transaction rate is also expected, irrespective of the value of transactions.
8. A decrease in technical declines and business declines have been reported across various payment systems by 10% and 5% year-on-year.
9. Fraud to Sales count for payment systems is expected to be less than 10 bps for most of the payment systems.
10. Enhancement of healthy competition in the payments space and establishment of new Payments System Operators is envisioned.
With RBI’s Vision 2021 being put in place, the estimations, although optimistic, are by no means unrealistic. There are enough reasons to believe that these predictions will outreach the estimated values by a wider margin than anticipated.