RBI: Need to enable payment solutions on feature phones

Although availability of mobile phones has made digital payments accessible in India, the innovation in mobile payment services is largely app-based, making them limited to smart phone users.

T Rabi Sankar, executive director, the Reserve Bank of India (RBI), said, “Hence, there is a need to enable payment services in feature phones. Fintech players will play a significant role in developing payment solutions for users of these phones.”

As of May 10, there were about 1.1 billion wireless telephone subscribers and 160 million wireless broadband subscribers. While various reports point to around 500 million smartphone users in the country, a large user base of feature phones exist even now.

Addressing a conference on fintech organised by the Federation of Indian Chambers of Commerce & Industry (Ficci) and Indian Banks Association (IBA), Sankar said the key to making the next leap in digitisation lies in enabling access to the untapped population.

“There is a need to enable payment services for feature phones, to provide a thrust towards enhanced adoption of digital payments. So, the focus now should be on feature phone-based and offline payments,” he added.

Digital payments in India have seen huge adoption, post demonetisation and the Covid-19 pandemic has also inadvertently provided enormous impetus to the payment system. While in the initial months of the pandemic, retail digital payments saw a significant drop due to the stringent lockdown, but with the gradual unlocking of the country and the economy, digital payments are almost back to the pre-covid levels.

During August 2020, UPI processed over 1.5 billion transactions and it has been touching new highs every month since June. “UPI is recognised globally as the fastest growing retail payments system,” added Sankar.

“In some time from now, this is going to explode because now people have realised the importance of going digital,” said K Rajaraman, additional secretary, department of economic affairs.

“Fintech has done us a lot of good. I think we need to leverage technology to catch up with the developed world in terms of digital penetration. The RBI is taking important measures to promote technology, and some of the more important ones are regulatory sandbox. The first cohort has identified some specific technologies. Unfortunately, due to Covid, testing has got delayed,” Sankar said.

“The RBI is in the process of setting up an innovation hub. We would expect technology firms, financial entities and even funding agencies to interact on this hub and start the entire process from ideation to creation and piloting of solutions,” Sankar added.

Apart from developing payment solutions for feature phone users, other focus areas for fintech players could be contactless payments and tokenisation, he felt. Similarly, blockchain and distributed ledger also have immense potential, according to Shankar.