RBI promoting risk-based regulation for payments
Navin Surya, founder of So Hum Bharat Digital Payments, speaks about the digital payments scenario in the country at Technoviti 2021:
Navin Surya, Founder, So Hum Bharat Digital Payments, says there has been considerable progress in the last 2 decades in the payments sector and consumer penetration in the Indian market rose from 3% to nearly 12%. India has now established itself as a global leader in innovation with payment technology institutions like NPCI leading from the front and payment methods like UPI gaining wide popularity.
He says while there are 100-150 million estimated users of digital payments methods, the digital expenditure is only 18% and considering the growth rate and the current participation, India’s population would need to spend 50%60% of their total spending digitally for the country’s society to be transformed into a digital society. And at the prevailing rate, this would take nearly 3 decades.
However, the covid and the resultant pandemic and the measurers initiated by the government to curtail movement of people, digitization-related areas in the country have seen remarkable progress, he said. Adding this is the perfect time for organizations to cooperate and bring more entities into the digital fold. “Ideas to shorten this journey to a decade are needed,” he added.
In order to create effective structures to promote digitization, there is need to widen the levels of digitization and discourage wider use of cash, he said. He also pointed out that despite intense competition, global fintechs have grown and increased their revenues in India.
CONCEPT OF ZERO MDR
Surya said a zero-merchant discount rate (MDR) should be benefiting macro entrepreneurs or low value customers depending on the market price. Such measures should benefit the deserving users, allowing everybody to create value for themselves. Zero-MDR would not diminish revenues for financial entities, he added.
CREATING DIFFERENCES
He said it is a fact that customers often have sub-standard experience in different areas. “Even within existing products in an expanding ecosystem, processing time and challenges between multiple players remain. With fintech expanding over the last decade or so, it becomes complex for customers entering multiple levels, creating problems of accountability,” he added.
The ecosystem, he said, must solve this issue without further complicating the issue as the transaction journey is as significant as safety and security.
Making digital experiences less problematic in comparison to cash, is also there, he said and the aim should be to create a better digital customer experience as digital shifts to a large customer base.
NEW BANK LICENSES
Navin Surya pointed out that RBI has taken bold decision in allowing nonbanking entities to apply for bank licenses. The regular, he said, is having continuous, cohesive dialogues with the industry aiming at improvising the evolving system with the ultimate aim to make the industry participants selfregulate. It is also aspiring to create riskbased regulations.
He compared the regulator offering incentives or levying penalties to a game of snakes and ladders, with the regulator acting as a custodian.
He was also confident that with preparations, central banks will eventually bring CBDCs, or central bank digital currencies, thereby heralding a new era. However, cryptocurrencies floated by private entities need strong regulation, he said, adding a multi-regulator scenario might complicate issues.