A three-year plan for a 10-fold growth in digital payments, enabling recurring payments on all digital channels and a lower interchange for card payments are among the recommendations made by the Nandan Nilekani-headed high level committee on deepening of digital payments.
Of the 73 recommendations meant for the government, the Reserve Bank of India (RBI), industry and the department of telecommunications, a few seek a relook at some RBI guidelines. For instance, the report has asked for recurring payments — for things like loan repayments, systematic investment plans (SIPs) and media subscriptions — to be enabled for all modes of digital payments, including the Unified Payments Interface (UPI).
The central bank is understood to have categorically disallowed the introduction of a recurring payments feature on UPI 2.0 in spite of representations in its favour.
The report, posted on the RBI website on Monday, also recommends a review of at least one RBI guideline with respect to the operation of ATMs. “…the committee recommends a review of the recent guidelines for swapping cassettes during the loading of cash in ATMs,” it said.
The committee has also suggested that in order to ensure that small merchants continue to accept digital payments, the government should continue with the current scheme to refund the merchant discount rate (MDR) for transactions of under `2,000 beyond December 2019 for another two years.
The report said that the RBI and the government should plan for the volume of digital transactions to grow by a factor of 10 in three years. This would result in per capita digital transactions reaching 220 in three years from the current level of 22.
The corresponding increase in value relative to gross domestic product (GDP) would be 2 times, the report noted. “This growth may be accompanied by a corresponding increase in the number of users of digital transactions by a factor of three, from approximately 100 million to 300 million,” it said.
According to the committee, the mechanism of MDR and interchange fees being determined by the market does not appear to be working and there are fewer acquirers. To correct this situation, the committee has recommended that the interchange on card payments be reduced by 15 basis points (bps). The report also says that the RBI must set up a standing committee to review the MDR and interchange on a periodic basis. The committee must include issuers, acquirers, merchants and academics.
The committee recommended that payment schemes be allowed to induct non-banks as associate members to encourage acceptance, even as settlement continues to be through the sponsor banks.
The setting up of an ‘Acceptance Development Fund’ for improving the acquiring infrastructure in tier IV, V and VI locations is another recommendation of the committee. Issuers would be required to contribute to this fund from the interchange fees, matched by funds from the RBI.
In order to ensure that a willing customer is able to carry out financial transactions digitally, the committee recommended that each merchant supports at least one digital mode from among BharatQR, UPI QR or cards. The tradition of banks allowing free transactions at branches, ATMs and through net banking must be extended to digital transactions as well.
To allow payment systems to scale, and to meet users’ expectations of speedier response to complaints, the committee recommended that all payment systems operators, including the National Payments Corporation of India (NPCI), implement an online dispute resolution (ODR) system that is fast and fair.
“This system may be used by the banks to handle the customer’s complaints,” the report observed, adding, “Further, aggregate (participant-wise) data on issues reported, and resolution timelinesp must be published from the ODR, so that the regulator has the necessary visibility into the health of the payment system. The RBI ombudsman data may be used to improve the dispute resolution process and results.”