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Payments Council of India strives for financial inclusion through payments

The Payments Council of India (PCI), constituting of more than 100 members across representing various regulated industry players in the payments and settlements systems, has made a presentation to the RBI Committee on Deepening of Digital Payments (CDDP) headed by Mr. Nandan Nilekani at their office in Mumbai. An expert committee of 4 met the RBI and presented its key recommendations for driving financial inclusion through payments.

In its report the council has recommended a medium to long term strategy for accelerating the growth of digital payments in India backed by a regulatory regime which is conducive to enhancing parity between cash and digital payments, offering seamless access to payments and settlements infrastructure (RTGS), formation of a KYC bureau, promoting economic viability through tax incentives and exemptions, stimulating competition and offering customer choice while safeguarding transactional security and providing a level playing field to new entrants.

Key suggestions made by PCI were:

  • Allowing cash out from PPIs through ATMs and agent networks for domestic remittances of the unbanked population
  • Leveraging Electronic Benefit Transfer (EBT) and Direct Benefit Transfer (DBT) processing through PPIs as efficient and economical solutions
  • Conversion of all PPIs to full KYC accounts within 12 months from issuance not to be time bound but the conversion should be based on the value and additional features availed by the customers
  • Allowing digital platforms especially PPIs to seamlessly issue and allow payments and remittance transactions below INR 50,000/- with minimum KYC (mobile verified)
  • Extending interoperability to PPIs (which is currently only allowed to merchants and remittances at the domestic level) to foreign merchants and foreign inward remittances
  • Payment entities should be given seamless access to all payment infrastructure and settlements systems.
  • Allowing non-bank merchant acquirers to take direct membership with card networks to acquire merchants under their own BIN
  • Allowing NBFCs to issue credit cards (physical or digital form factor)
  • Making the capital and net owned funds (NoF)  proportionate to business as it is critical from a compliance cost perspective
  • Allowing payment service providers (PSPs) to seamlessly cross-sell third-party financial products like credit, insurance (medical/accident) among others which will nurture sustenance of the business model while offering convenience to customers.

Naveen Surya, (Chairman Emeritus, PCI) said, “The monthly retail payments currently are aggregated at approximately USD $275 billion and we are eyeing for USD $500 billion in the next two years. This clearly indicates our country is on the verge of becoming a digital superpower. However, cash still reigns supreme and to digitize the cash use in the country we need to build a robust digital payments ecosystem besides enhancing customer faith in the industry.”

The Payments Council suggested considering a KYC bureau for the entire payments system owing to technological challenges in the central KYC registry system (cKYC) and recommended access to eKYC or digital KYC framework and an interoperable KYC infrastructure as urgent and critical to improve customer acquisition cost across payment services besides avoiding cost duplication.”

According to Mr. Loney Antony, (Co-Chair, PCI and Managing Director, Hitachi Payment Services) “All viable and profitable payment initiatives should be fully opened up to the market on a continuous basis to drive competition and innovation via ‘on tap licensing policy’ rather than a onetime ‘window’ approach. Besides all payment entities should have the option to move up or down the value chain provided financial net worth criterion is being met with. Also in the absence of a Regulatory Sandbox an appropriate framework should run continuous pilots on new ideas and concepts under the industry and regulator’s supervision to foster innovation”.

The council strongly recommends offering end customers the choice of deciding the level of KYC for payment transactions basis his frequency, convenience and risk appetite. They have also proposed for an independent security standard/ certification to establish online payment systems as ‘Safe to Pay’ based on fulfilment of the safety and security requirements, so as to give customers the trust to transact online in a safe and secure manner besides a framework for sharing of fraud related data (negative list of individuals) by PSPs to an independent body for better vigilance and controls.

Payments Council of India (PCI) is a part of the Internet and Mobile Association of India and represents more than 100 players in the payments and settlement systems. Its objective is to address and help resolve various industry level issues and barriers which require discussion and action. The important stakeholders are prepaid payment issuers, payments banks, merchant aggregators and acquirers, payments networks, BBPOUs, UPI facilitators and International Remittances facilitators.

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