In June 2022, the RBI released ‘Payments Vision 2025’ for India aiming to provide every user with safe, secure, fast, convenient, accessible, and affordable e-payment options. During this vision period, RBI talks about five anchor goalposts of Integrity, Inclusion, Innovation, Institutionalization, and Internationalization, bucketed mainly into below focus areas:

Cross Border Payments

  • Provide secure transaction to customers for international transactions with Two Factor Authentication (2FA)
  • Extending outreach of RTGS, NEFT, UPI and RuPay Cards globally in collaboration with the Central Bank, BIS, World Bank, etc.
  • Introduction of Central Bank Digital Currency (CBDC) to facilitate domestic and international transactions

Domestic Payment Processing

  • Implementation of National Card Switch for card transactions at POS similar to National Financial switch (NFS) for ATM transactions
  • Migration of all RBI operated payment system messages to ISO 20022 standard for better compliance and regulation, automation, rerouting, fraud detection, etc.
  • Review needed for multiple payment identifiers such as bank A/c no and IFSC for fund transfer. Instead introduce Legal Entity Identifiers (LEI) for the same based on KYC, fraud detection, corporate invoice and so on.
  • Migration of government receipts and payments to digital mode (subsidies/benefits given through APBS operated by NPCI) with integration to RBI’s eKuber.
  • Expansion of contactless payments, National Common Mobility Card (NCMC), from transit to retail use cases and many more..

Payment Policies and Guidelines: 

  • Constitute Payments Advisory Council (PAC) to assist the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) to oversee governance and strategic decisions related to payment systems
  • Develop a conducive framework and enhance security of transactions for Prepaid Payment Instruments (PPI) given its growth trajectory, including full-KYC PPIs, closed system PPIs, and so on.
  • Examine Buy Now Pay Later (BNPL) services and explore guidelines around KYC, Fraud management and governance framework.
  • Revisit the effectiveness of Payments Infrastructure Development Fund (PIDF) scheme for deployment of POS and expand the same to another areas if required
  • Evaluate payment charges levied on merchants/customers to encourage digital payment system adoption.

Fraud Mitigation: 

  • Enable customers to report fraudulent transactions instantly through Online Dispute Resolution (ODR)
  • Enhancements in Central Payment Fraud Registry (CPFR) by creating a negative database of fraudulent beneficiaries, analyzing modus operandi of fraudsters, publishing reports on trends in payment frauds, etc.

Bringing non-bank entities/players within the regulatory ambit

  • Instructions to regulate Payment Aggregators and provide baseline recommendations to Payment Gateway Providers.
  • BigTechs and FinTechs will be regulated by RBI around encompassing domestic incorporation, reporting, data use, etc.

Summing up…

RBI aims to further develop India’s payment landscape and establish India as a powerhouse of payments globally. The RBI will undertake 47 initiatives to streamline the e-payments infrastructure in the country as it prepares for the next evolution of the space. Ensuring safe, secure, reliable, accessible, affordable and efficient payment systems has been one of the important strategic objectives and goals of the Reserve Bank of India (RBI).

The RBI aims to increase the number of digital payment transactions by more than 3X by 2025. Also, with the introduction of Digital Rupee, RBI envisages a significant increase in efficiencies and reduction in associated reconciliation costs.  It aims to check the flow of cash in distribution and enhance the overall digital transactions in the country. 

Operational and security concerns continue to be at the heart to withstand and recover from the evolving threat landscape. Overall, the RBI seems to be pushing secure digital transactions and reducing the time taken in various settlements.