By Mr. A.P.Hota MD & CEO on National Payment Corporation of India (NPCI)
The Union Cabinet’s decision to implement a package of measures to promote payments through cards and digital means is a step of far-reaching significance. This is in broad alignment with Reserve Bank of India’s plan to build a less cash / largely cashless society.
The decision on “No Surcharge” for card / digital payments would have immediate impact on the consumers using cards at the petrol pumps or purchasing railway tickets. The jewellery stores or white goods stores also cannot take the plea of cost of card transactions once it is prohibited by regulations. Many of the card issuing banks which were previously absorbing the surcharge imposed at petrol pumps would be relieved. Expanding the card acceptance network has been an urgent necessity in view of the fact that there are 650 Million payment cards including 250 Million RuPay cards in rural and semi-urban areas but there are not enough acceptance terminals. Compared to China, US and Brazil where PoS terminals are ubiquitous (7 Mn, 5.5 Mn and 5 Mn terminals respectively), in India the number of terminals is barely 1.2 Mn. Although the mechanism of expanding the acceptance network has not been finalized, a consensus on the direction to move towards ubiquitous presence of terminals will push the acquiring banks to rethink their strategy.
Two specific measures on promotion of mobile banking and rationalization of telecom service charges for financial transactions are most welcome. It is gathered that one of the reasons for USSD based mobile banking not taking off is due to telcos charging Re. 1.50 per transaction irrespective of whether the transaction is successful or not. There is an urgent need for bringing down this rate to Paise 50 or less.
It is also heartening to note that the Government plans to create necessary assurance mechanism for quick resolution of fraudulent transactions. Though the level of frauds in ePayments in India is much lower than many developed markets, we need to take stringent steps right from the beginning and well before the volume picks up in a big way. Consumer redressal issues are also important and the grievance redressal mechanism should be strengthened. NPCI is fully aligned on the broad vision of moving towards less cash society.