RBI’s Payments Vision 2025 visualizes major changes in payments system

Initiatives under Payments Vision 2025 are expected to have farreaching outcomes:

RBI’s Department of Payment and Settlement Systems has released its ‘Payments Vision 2025’ with the core theme of 4Es - E-Payments for Everyone, Everywhere, Everytime. It builds on the Payments Vision 2019-21 document and outlines the thought process for the period up to December 2025. The document also discusses about ring-fencing of domestic payment systems, including the need to mandate domestic processing of payment transactions, in view of the emerging geopolitical risks.

While stressing on the 4Es, the document also lists the overall objective of providing every user with safe, secure, fast, convenient, accessible and affordable e-payment options. The aim is to establish India as a powerhouse of payments globally.

5 CRITICAL PILLARS

The document highlights that “As we embark upon the journey of realising Payments Vision 2025, the steps taken so far towards enhanced outreach, customer centricity, cybersecurity and digital deepening would be further consolidated and built upon through the 5 pillars of Integrity, Inclusion, Innovation, Institutionalisation and Internationalisation. These measures are expected to propel our payment systems further and surpass their potential at the national and international levels. Payments Vision 2025 leverages India’s efforts and builds on the focus of G-20 to enhance cross-border payments by addressing the 4 key challenges of cost, speed, access and transparency. Given the dynamic space of payment systems in the financial services space, efforts shall be conditioned by developments and readiness of the ecosystem to accept and further these initiatives.”

It also mentions that other initiatives would also emerge from the evolving situation and may not necessarily be constrained by what the Payments Vision documents. “For instance, recent developments in terms of (a) establishment of Reserve Bank Innovation Hub; (b) framework for security of card transactions like switch on / off facility; (c) guidelines on limiting customer liability in case of unauthorised transactions using Prepaid Payment Instruments (PPIs); (d) enabling Online Dispute Resolution (ODR) for digital payments; (e) review of scope and coverage of system audit of Payment System Operators (PSOs); (f) streamlining of Quick Response (QR) code infrastructure; (g) perpetual validity for Certificate of Authorisation of PSOs; (h) construction of RBI Digital Payments Index (DPI); etc., were in addition to the remit from the Payments Vision 2019-21 document,” it says.

It has also been stressed that usage of paper instruments has come down significantly during 2019-21, with its share in total retail payments registering a decline from 3.83% to 0.88% in terms of volume and from 19.62% to 11.47% in terms of value.

OBJECTIVES OF VISION DOCUMENT

Highlights of the Payments Vision 2025 are:

1. Core Theme - E-Payments for Everyone, Everywhere, Everytime (4 Es) and vision of providing every user with Safe, Secure, Fast, Convenient, Accessible and Affordable e-payment options (6 Attributes)

2. A promise of further elevating payment systems towards a realm of empowering users with affordable payment options accessible anytime and anywhere with convenience. As the j ourney towards less-cash and less-card society unfolds, concomitant expansion in the basket of digital payment options with credence and confidence would ensure sustenance of RBI’s approach of facilitating users with a seamless digital payment experience. This will also reinforce India’s position as the global leader in digital payments domain.

3. There are 5 anchor goalposts of Integrity, Inclusion, Innovation, Institutional is at ion and International is at ion. Resilience to operational and security concerns would continue to be at the heart to withstand and recover from the evolving threat landscape. Integrity of payment systems shall be non-negotiable for buttressing customer confidence. With the change / shift in customer behaviour towards embracing digital and touchless modes of payments, partly due to covid, there is a spike of 50% in mobile banking users, indicating inclusion of firsttime users into the digital fold. The challenge to make this an irreversible shift, eventually seeking convenient and tailored payment solutions, would be pursued.

4. Inclusion would be promoted through collection and publication of disaggregated payment data leading to policy enhancements, where required; customer awareness transcending geographies, participant members and customer segments; identifying spatial penetration of digital payment acceptance infrastructure across states / districts; reviewing the scope of PIDF Scheme, etc.

5. To further spur innovation, UPI like system for cards and an enabling framework for Internet of Things (IoT) based payments would be explored. 6. It is proposed that India’s achievements in the payments realm will be showcased at the international fora. Increased involvement in discussions of global standard-setting bodies, including interlinkage with fast payment systems of other jurisdictions with focus on adjoining corridors, will be furthered; this could also be expected to improve trade and commerce and reduce cost and time for remittances.

7. As higher adoption of digital payments and associated less-cash outcome is expected to reduce costs associated with usage of cash or near-cash substitutes, this would enhance the share of digital payments to GDP and contribute towards improved transparency in transactions.

INITIATIVES PLANNED

Under Payments Vision 2025, initiatives are proposed and planned to be implemented under the 5 goalposts of Integrity, Inclusion, Innovation, Institutionalisation and Internationalisation.

Under Integrity

We ave in alternate authentication mechanism(s) for digital payment transactions; Broaden scope, usage and relevance of LEI in all payment activities; Expand interoperability to contactless transit card payments in offline mode; Enhance scalability and resilience of payment systems; Leverage ODR system for fraud monitoring and reporting; Provide enhancements to CPFIR; Provide payee name look-up for fund transfers; Include assessment of RTGS & NEFT under Principles for Financial Market Infrastructures (PFMIs); Study creation of Digital Payments Protection Fund (DPPF).

Under Inclusion

Enable geo-tagging of digital payment infrastructure and transactions; Revisit guidelines for PPIs including closed system PPIs; Consider framework for regulation of all significant intermediaries in payments ecosystem; Bring in enhancements to cheque truncation system, including One Nation One Grid clearing and settlement perspective; Extend internal Ombudsman Scheme to all PSOs; Upscale customer outreach and awareness activities; Attempt regulation of bigtechs and fintechs in payments space; Continue endeavour to collect and publish granular disaggregated payments systems data; Undertake evaluation of charges for all payment systems; Coordinate migration of government receipts and payments to digital mode.

Under Innovation

Facilitate framework for IoT and context-based payments; Migrate all RBI-operated payments system messages to ISO 20022 standard; Link credit cards and credit components of banking products to UPI; Create payment system for processing online merchant payments using internet, mobile banking; Organize payment innovation contests and hackathons; Review need for multiple payment identifiers; Explore guidelines on payments involving ‘Buy Now Pay Later’ Services.

Under Institutionalisation:

Revisit guidelines for PPIs, including closed system PPIs; Payments Advisory Council to assist Board for Regulation and Supervision of Payment and Settlement Systems; Operationalize National Card Switch for card transactions at PoS and resultant settlements; Active engagement and involvement in international fora (discussions of standard-setting bodies).

Under Internationalization:

Global outreach of RTGS, NEFT, UPI and RuPay cards; Expand SFMS, InFiNet frameworks across jurisdictions; 2-factor authentication for cross-border card transactions; Seek inclusion of Indian Rupee in Continuous Linked Settlements; Bring further efficiencies in payment processing and settlements on introduction of Central Bank Digital Currencies - domestic and cross-border.

OUTCOMES EXPECTED

The document expects these initiatives to have the following expected outcomes during the Vision period:

i. Volume of cheque-based payments to be less than 0.25% of the total retail payments;

ii. More than 3x increase in number of digital payment transactions;

iii. UPI to register average annualised growth of 50% and IMPS / NEFT at 20%;

iv. Increase of payment transaction turnover vis-à-vis GDP to 8; v. Increase in debit card transactions at PoS by 20%;

vi. Debit card usage to surpass credit cards in terms of value;

vii. Increase in PPI transactions by 150%; viii. Card acceptance infrastructure to increase to 250 million;

ix. Increase of registered customer base for mobile based transactions by 50% CAGR; and

x. Reduction in Cash in Circulation (CIC) as a percentage of GD