69. Payments Digest — VII
Above picture is of Choluteca Bridge in Honduras. After hurricane Mitch (1998), the river changed its course and now, the bridge is standing on dry land.
At times, FinTech regulations tend to create such situation for business models and we have witnessed quite few in last few years, and last quarter was no different.
What an eventful quarter… not good or great but just an eventful one… many regulations, guidelines, amendments to guidelines, and deadlines that are fast followed by revised deadlines.
Let’s start then…
The vision:
No… no… not this Vision… we shall talk about RBI’s vision.
RBI published Payment Vision 2025 that focuses on 5 Is (Below)
The Vision document will give hints on what to expect next. So going by this document, we can expect RBI to push for:
- Inclusive growth of digital payments
- Safeguarding customers and reduce frauds with regulation, frameworks and products
- More Regulations: BNPL, BigTechs & FinTechs etc.
- Take our payment products (NEFT, RTGS, UPI, Rupay) globally
- Central Bank Digital Currency (CBDC)
- Innovations: UPI+Credit Card, Alternative method for authentication, 2FA for cross-border card transaction, framework for IoT & Context based payment, payment system for internet/mobile banking (oh… must be a happy moment for internet banking… ha ha.)
1. Credit Related:
RBI has been quite active in this space and few recent guidelines and updates to these guidelines created a lot of confusion and also, potential threat to business models. Few of those guidelines:
- Card issuance guideline: Emphasis on customer safety and flexibility (good), and at the same time, limits FinTechs/merchants from accessing transaction data (data).
- Credit line cannot be used for topping up non-bank PPI (Prepaid Payment Instrument). This guideline will impact FinTechs and NBFCs that issue ‘Credit (like) Cards’. Of course, these companies are trying to find middle ground with RBI… let’s see what happens.
- Linking credit cards to UPI: So far we could link only bank accounts via debit card (and Aadhar OTP). Now, we can link credit cards to UPI (to begin with only RuPay Cc). Still so many unanswered questions: how will MDR work, what will be the role of Visa/MasterCard, and how will it not be misused?
Super interesting topics. Read:Credit Card + BNPL + Prepaid Card + UPI
2. Limit on Mandate:
Maximum debit per transaction amount is increased to Rs.15,000 from earlier Rs.5,000. This change will be applicable to mandates on cards as well as UPI Autopay. Increased limit will allow banks/merchants/PAs to cover more use cases with higher ticket size(e.g. insurance premium)
Unanswered Questions: I have already set up a mandate with a maximum limit of Rs.5000. So do I need to set-up a mandate again or will it be changed from the backend? How will RBI make sure that the bank/PA/merchant is not changing mandate limits without customer consent?
Note: Read these articles to know more about card mandate and Autopay.
3. Tokenization:
Deadline to complete tokenization was on 1st July 2022. RBI was assessing whether the ecosystem (issuing banks, acquiring banks, PAs, merchants) is ready or not?
As expected, the ecosystem was not ready, yet. Hence, RBI decided to extend deadline by three more months. New deadline — 30th Sep 2022.
Refer this article to know details about Tokenization
Stringent guidelines, no clarity about readiness and new deadlines — Finally, Apple stopped card acceptance and will allow only UPI and Net-banking (Wow… must be a proud moment for net-banking.. Ha ha..)
4. BBPOU Net worth:
RBI reduced net worth requirement for non-bank BBPOUs (Bharat Bill Payments Operating Unit) from Rs.100 Crore to Rs.25 Crore. You may think that is good for new entrants (which is true to some extent) but it is not easy to make room for new entrants in this space (unless they have deep pockets) and it won’t be easy to dislodge incumbent giants especially BillDesk which is now acquired by PayU (so more fire power)
What is BBPOU? Read everything about BBPS (Bharat Bill Payment System)
5. Geo tagging:
RBI issued a framework for geo tagging of payment acceptance touch points such as POS, QR.
Digital payments are growing. RBI’s DPI also shows the growth (From 100 in Mar’18 to 304 in Sep’22). But is this growth consistent across India or concentrated in certain areas (e.g. metros)?
Geo-tagging (latitude and longitude) information will help the regulator to identify the geographic penetration of digital payment infrastructure and take appropriate actions to increase the coverage.
6. e-RUPI Limit:
Do you remember e-RUPI? No… never mind.
e-RUPI is similar to gift voucher — one time loading and can be used at selected merchants. You can refer to this article to know more.
The voucher limit is increased from Rs.10,000 to Rs.1,00,000. Basis the use cases for which it is designed (Government benefit disbursement, gifting etc.) I am not sure whether this update will have any large scale impact! (Or for that matter, will e-RUPI have any large scale impact)
7. What’s in a name:
When it comes to payments — it is important to know the name to whom you are paying. There are plenty of people out there trying to cheat people by pretending to be agents of insurers, investors or eCommerce companies. That is the dark side of digital payments.
There are two new developments:
a. TRAI (Telecom Regulatory Authority of India) is planning to come up with a framework to show the name of the caller as per KYC (Know Your Customer) document that is used while availing the mobile or landline connection…. neat!
Caller ID detection Apps (e.g. Truecaller) are not standard and I do not trust their algorithms. When I took a new mobile connection, my number used to show as ‘Akka’ on Truecaller.
b. WhatsApp is mandated to show the legal name for UPI transactions to reduce UPI frauds. From now on, no more ‘Unidragon’, just plain old ‘Aditya Kulkarni’.
Talking of WhatsApp, NPCI gave a go ahead to onboard additional 60 million users (total 100 million users now. Also, WhatsApp is running a ‘cashback offer’… Enjoy before offer dries out. If you are simply interested in knowing about discount, cashback and rewards — Read this article!
8. Miscellaneous:
a. MasterCard: RBI lifted embargo on MasterCard after almost a year. Now, MasterCard can onboard new customers and try to gain the lost ground.
No one asked but Amex is yet to come out of their embargo.
b. Bonjour: UPI and RuPay are now accepted in France. NPCI’s international arm, NIPL has already expanded UPI/RuPay footprint in Singapore, Bhutan, Nepal and UAE.
c. Crypto: Last quarter was full of downs and downs for crypto. Financial Year (1st April 2022) started with 30% taxation on crypto assets (no provision to offset loss) and followed by blanket disabling of payment rails (UPI, wallet, net-banking and Virtual Accounts). Wait… not done yet… from 1st July, 1% TDS (on all crypto or Virtual Digital Asset purchases) will commence.
d. Mutual Fund: SEBI implemented new guidelines for the Mutual Fund sector. Few of the important ones: (1) not using a common pool account for MF purchase (2) enhanced (TPV) Third Party Validation (3) 2FA for online redemption… Great! More OTPs
e. Critical Information Infrastructure: The Ministry of Electronics and IT (MeitY) has declared HDFC, ICICI and NPCI systems as critical information infrastructure (CII) — “the computer resource, the incapacitation or destruction of which, shall have debilitating impact on national security, economy, public health or safety”.
NCIIPC (National Critical Information Infrastructure Protection Centre) is the nodal agency for taking all measures to protect the nation’s CII such as Power, Telecom, Transport, Banks & Financial Services
f. ATM Cash withdrawal using UPI: Basis RBI circular, NPCI has issued a circular to its members to implement cash withdrawal at ATM using UPI. How will it work? What will be the role of an ATM network provider (such as FSS), what will be the charges? Will it work using QR scan (Yeah… everyone’s favourite QR)? If I get more info then I will write in detail… for now, that’s it.
9. Circle of life:
Among many other reasons, UPI played an important role in the decline of mobile wallets. UPI is super seamless to use where the user doesn’t have to load money but directly pay using the linked bank account. But UPI’s success brought a big problem i.e. scalability and performance.
More than 50% of transactions are less than Rs.200 and these small value transactions burden/load/clog infrastructure.
Do you remember when NPCI tried to ban transactions below Rs.50 of gaming merchants? Although it was never implemented, the idea was a bit unfair and definitely not long term.
So what is the long term solution?
Answer: Wallet (Yes, wallet)
UPI will have an on-device wallet (UPI Lite) — users can load up to Rs.2000 and can make transactions/transfers up to Rs.200. Also, transactions are done partially offline (Debit is done without the internet and credit will be done with the internet). Will discuss this topic in detail once it is launched (ETA: Unknown)
So, as they say, “what goes around, comes around” :)
10. Music + Payments:
Payments can get a bit boring.. Same old success rate, integration, tokenization, refunds, guidelines… blah… blah… So how about adding a little bit of music to it?
Musical update: NPCI has partnered with singer Badshah to promote UPI AutoPay (Recurring payment solution on UPI). ‘Life Hai Wow’ is the anthem name <Link will be added once the video is released>
That’s it folks… Have a nice day!
