On the face of it, the Ratan Watal-headed committee on digital payments has dealt with many important pressure points as far as digital payments in the country are concerned. It asks for interoperability among various digital payment providers like wallets and banks and sets a two-month time-period in which all issues like restrictions on payment service providers (PSPs) had to be fixed—recall SBI’s tweet some days ago, where it told a customer that loading his PayTM wallet from the SBI internet banking had been disabled, and recommended he used SBI’s Buddy-wallet instead.
Should interoperability not happen, the panel says this “could lead to the creation of multiple ‘islands’ of PSPs, thereby reducing the value that can be derived by customers out of the services provided by a particular PSP”—had such interoperability not been mandated by the telecom regulator, in return for a fixed/regulated fee structure, India wouldn’t have the vibrant telecom market it has today. Similarly, on the MDR charges paid to banks for using their PoS machines—these have been reduced to zero by the government to popularise digital payments—the committee says “the present statistics suggest that capping of MDR has slowed the growth of deployment of PoS terminals”.
Where the panel gets it horribly wrong is in its desire to halve India’s cash-to-GDP levels, to 6% in three years—indeed, the government is in talks with RBI to figure out how much of the demonetised cash should be replaced, in an attempt to force more use of digital payment mechanisms. Watal assumes, incorrectly, that India uses too much cash because of its black economy—reduce this, and the black economy gets squeezed.
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