Reserve Bank of India governor Shaktikanta Das on Saturday said though the digital payments infrastructure has grown rapidly over the past years, some payment system operators (PSOs) are unwilling to comply with regulatory instructions.
“While there is wide appreciation of the Online Dispute Resolution (ODR) system conceived by RBI, how many PSOs have actually enabled it? Should not the entities embrace such initiatives upfront and enhance customer satisfaction? Afterall, PSOs deal with public money,” governor Das said in a speech at the first Payment System Operators’ Conference in Kochi.
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The RBI had directed PSOs to implement an ODR system for disputes and grievances related to failed transactions in their respective payment systems by January 1, 2021.
As per Das, there are about 114 crore mobile phone connections in India, with urban and rural share being 55% and 45%, respectively. About 10.5 billion retail digital payment transactions amounting to `51 trillion being processed in January alone shows the size and efficiency of India’s digital payments, he added.
Governor Das said since PSOs are heavily dependent on technology, many new-age tech firms are entering the payments ecosystem and some of them have come under the regulatory ambit of the Reserve Bank for the first time. At times, some PSOs display unwillingness to comply with regulatory instructions, Das said, citing various reasons like cost of carrying out system-level changes.
“In this digital age, there is a necessity to constantly upgrade the systems so as to remain relevant and increase efficiency. Legacy systems must be updated to bring them in line with changing realities. While any system may be presumed to be resilient and safe, a single bad experience of the customer with digital payments may drive him away to other channels or modes of payments. PSOs have a big responsibility here,” the governor said.
The launch of UPI linkage with Singapore’s PayNow is a major step forward in the payments space and in future such linkages with other countries will make cross-border payments simple, affordable and real-time. QR code-based merchant payments through UPI apps are already enabled in Bhutan, Singapore and the UAE. These measures would help project India’s soft power at the global level, he said.
The UPI ecosystem recorded 8.3 billion transactions worth `13 trillion in January 2023. “The fact that the Digital Payments Index (DPI), developed by the Reserve Bank, has gone up from 100 as the base in March 2018 to 377.46 as of September 2022 is testimony to the long way we have travelled,” he added.
Further, increase in digital payments also highlights potential risks pertaining to cyber security, data privacy and operational resilience. PSOs must always be cognisant of the emerging threats and put in place suitable risk mitigation measures, Das said. A related area that requires focus is outsourcing arrangements of PSOs with their vendors. Service level agreements with vendors should meet minimum standards prescribed by the Reserve Bank. In all such agreements, PSOs’ right to conduct audit of the service provider must always be ensured, he added.
Having opened more than 48 crore Jan Dhan accounts, Governor Das said it would augur well to leverage these accounts and help people realise the ease that digital payments can bring to their lives. PSOs have an important role to play here in creating awareness and countering misinformation, Das said.
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Going forward, the PSOs should specifically focus on ensuring good governance and prudent risk management, maintaining robust IT infrastructure with cyber resilience and putting in place responsive grievance redress mechanism for long term success. Efforts may also be made for ensuring wider participation in the framework for offline payments. PSOs may also work on formation of Self-Regulatory Organisations (SROs) for greater good of all stakeholders, governor Das said.
“Every failed transaction, every fraud attempted or actually carried out, every complaint that is not satisfactorily addressed should be a cause of concern and must invite a detailed root cause analysis. It would do well to remember that like the batsman on the cricket field, you are only as good as the last ball faced,” he added.