Switch to Digi-money Will Mean More Transparency
G2P and access to the ‘unbanked’ 60% of population. Digi-money (e-rupee) is available electronically to holders and transferred directly between consumers or merchants. Money can only be exchanged and not bought. The Sale of Goods Act, 1930 excludes money from the definition of “goods”. E-rupee will not be ‘goods’, but money and may be declared as legal tender. Its issue would be ‘by exchange with cash’, tightly regulated by RBI and accounted as M1. Existing pre-paid instruments (PPI) or mobile wallets are goods purchased in cash attracting sales tax, that serve as a mere store of value. Transparency in G2P faces two challenges: interaction between government officials and beneficiaries leading to demand for bribes sans real-time checks on actual payments made; secondly, payments to unverified persons, who bear the same name as appearing in the list of beneficiaries, and without bank accounts (but with mobile numbers). To combat corruption, it must be- come mandatory to migrate all G2P to an agnostic MNO-platform with every transaction (using SMS) stored in a central database, and an electronic audit trail facilitating end-of-day accounting and monitoring in real-time. The advantage is that officials will be forced to transfer the exact amount to beneficiaries otherwise they stand exposed for non-performance of duty. A surveillance system could detect frauds of coercion -- e-money transfers from several beneficiaries to one number -- and other s us p i c i o us movements. The outcome is that purchases of daily goods or even saving under the NPS-S scheme (2 million persons enrolled) will be done in e-money. Till emoney is in circulation it will M1 and not be treated as deposits. MNOs will have to aggregate e-money held by their agents or their customers on a daily basis and report the same to RBI. The second step is to remove face-toface payments. Immediately, either Aadhar that matches biometrics of beneficiaries or an inter-operable KYC module (as used in the capital markets) of mobile operators for checking the ownership of mobile numbers, could be used. The current leakage in G2P could be curtailed to a very large extent. Over time capture of mobile numbers against each Aadhar number in a NPCI database will realise the ultimate goal of remote transfer of benefits. Of course, preparation of muster rolls could still be open to fraud. Persons holding e-money may be permitted to cash-out at agency outlets of MNOs, for a commission. Competition demands this facility be agnostic to MNO; similar to the money changing industry for exchange of foreign currency. Bulk holders of e-money, e.g shopkeepers, suppliers or aggregators under NPS-S, may exchange e-money into deposit accounts, to earn interest. Any extinction of e-money will be recorded on the central MNO- switch. Since initially, supply of e-money is only from government transfers, a defined pool of e-money makes reconciliation and accounting of e-money instantaneous.
Competition between e-money payment system and internet based transactions using bank accounts may benefit consumers. The mobile payment system may become the ‘rails’ for product distribution by financial intermediaries. Business model for MNOs would develop around products pushed through the e-money-paymentsystem and ownership of patterns of financial behavior in the e-money economy. MNOs in their existing legal form could be licensed as ‘domestic money exchanges’ and as ‘payment operators’, which may require multiple regulators, but one for each function -RBI and Trai. The IMPS (interbank) system created by NPCI uses platforms of MNOs. An inter-operable switch for e-money will form the backbone of a very low cost payment system for emoney, across all MNOs.