By Ketan Patel
Credit and Finance for MSMEs: Framework for geo-tagging of payment system touchpoints issued in March’22 by the Reserve Bank of India (RBI) is an important step in the creation of a robust payments acceptance infrastructure in the country. The framework provides for banks and non-bank payment service operators (PSOs) to collect and maintain merchants, which are MSMEs, related information and geographical coordinates for all payment touchpoints. Further bank and non-bank PSOs are required to provide this geo-tagging information of the payment touchpoints to the RBI.
Geo-tagging of payment touchpoints like POS, QR codes etc can provide useful insights related to regional penetration of digital payments and its distribution across the country. These insights can be used to identify the scope for deploying additional payment touchpoints for furthering digital acceptance. Also, it has been noticed that despite the availability of digital payment touchpoints in certain locations, especially in the rural parts of the country, a large number of people continue to use cash as the primary mode of transaction. The geo-tagging data can be leveraged to undertake focused digital literacy programmes for better adoption of deployment payments infrastructure for digital transactions.
RBI has been putting concocted efforts to encourage electronic payment systems in the country. The Payment and Settlement Systems Act, 2007, laid the foundation for today’s state of the art, efficient, fast and affordable payments infrastructure in the country. The payment system vision document released by RBI in 2012 proposed proactively encouraging electronic payment systems for ushering in a less-cash society in India. The last vision document released for 2021 aimed at empowering every Indian with access to a bouquet of e-payment options that is safe, secure, convenient, quick and affordable.
To achieve the above, the vision envisaged four goal-posts (4 Cs) – Competition, Cost, Convenience and Confidence. The action points emphasising the four specific goalposts have led to RBI releasing various guidelines in the last two years like the framework on Offline digital payment solutions (Jan’22), framework for authorisation of New Umbrella Entities (NUE) for retail payments (Feb’22), Regulation of payment gateway service providers and payment aggregators (Mar’21), guidelines for tokenization of card transactions (Sep’21) etc. Geo-tagging of payment system touchpoints was outlined as one of the goalposts for building customer confidence. It was mentioned that in order to measure the adoption of digital payments, it is essential to have the geographical location of the payment system touchpoints across the country.
RBI in its monetary policy had stated that deepening digital payments penetration across the country is a priority area for financial inclusion. RBI had set up PIDF, Public Infrastructure Development Fund with a corpus of Rs 614 crore to encourage deployment of acceptance infrastructure and create additional touchpoints. Further, the IT ministry along with the housing and urban affairs launched a special drive to onboard street vendors to start accepting and making digital payments under the PM SVANidhi scheme.
The two schemes have helped bank and non-bank payment aggregators to invest in tier 3, tier 4 and further interior locations to deploy digital payment infrastructure in the last one year. Basis the results, the government has decided to continue the PM SVANidhi scheme till December 2024. However, to ensure a balanced spread of acceptance infrastructure across the country, location information of existing payment acceptance infrastructure is essential.
The location information of the merchants can be married with various other data points like demographics, population, population group, high economic and commercial activity, high merchant density etc for identifying the scope and opportunities at a particular location for deploying payment touchpoints. It will also help monitor infrastructure density across different locations and optimize the distribution of payment infrastructure.
Geo-tagging of the payments touch point can also help in better fraud and risk management of digital payments thus bringing further trust to digital payments. RBI and banks collect chargeback and transaction fraud data at the merchant level. By mapping the chargeback and fraud data with the merchant location data, banks and payment service providers can identify negative or high-risk locations which can help them define better risk control and KYC policies.
Geolocation data can also help pinpoint irregularities in card present transactions if the same card has been presented for transactions in distant geography on the same day. This information can be relayed to the merchant and the transaction can then be flagged as potential fraud. In the case of POS devices, banks and payment service providers can also benefit by using geo-tagging of merchant location as a low-cost verification tool that provides additional confidence and information about the existence of their equipment thus ensuring easy traceability and recovery of their physical assets.
RBI has put the onus on the bank and non-bank PSOs to ensure the accuracy of merchant and location details related to the payment touchpoint. All banks and non-bank PSOs will be solely responsible for ensuring data about payment touchpoints deployed and the merchants acquired by them is up to date and accurate and the required information is reported to RBI in a timely manner as prescribed. This will enable proper monitoring of the availability of payment acceptance infrastructure which in turn will be leveraged by RBI for suitable policy interventions wherever required for achieving the policy objective of deepening digital payments and providing inclusive access to all citizens of the country.
Ketan Patel is CEO of Mswipe. Views expressed are the author’s own.