74. Payments Digest — VIII

Top three suspenses that bothered me…

I already got the answer for the first two; And now RBI has started lifting the suspense around the 3rd one.

Few Payment Aggregators received in-principle approvals and many more to go (Reminded me of Campus interview season!).

PAs: Stripe, Cashfree, PineLabs, Razorpay, Pay10, m-swipe, Lyra, EaseBuzz, NTT Data, Juspay, SabPaisa, CC Avenue, Open, Digio, NDML, Paymate, PaySharp, Worldline (Many more to go)

At present, we only have gossip about the PAs that got rejected. So let’s wait for the RBI’s official list.

Update (15 Feb): RBI has published status of PA applicants (Link to list)

RBI gave extension to PAs whose application was rejected for not meeting Rs.15Cr net worth. These companies can re-apply (before 30-Sep-22) and show net-worth of Rs.25Cr. Such companies can operate till the end of Mar’23.

What next? — RBI wants to regulate offline payments aggregators as well (It may not be as interesting as online payments…!)

A lot of things happened this year… you may want to read Payments Digest-VI and Payments Digest VII.

Let’s start with the latest edition of Payments digest

1. Tokenization:

After much deliberation, confusion, extension and more extension… Tokenization has been effective since 1st Oct 2022.

Tokenization is one of the biggest milestones in the Indian payments ecosystem. [Read basics Here]

Big round of applause to everyone — RBI, NPCI, card networks, banks, PGs, Payment Aggregators, TSPs, merchants, customers, silent consents and cashbacks!

2. Internationalisation of Indian Payments

India will hold the G20 presidency for a year from 1st Dec 2022. We deserve it and much more!

RBI and GoI have been pushing for internationalisation of Indian Rupees and payment products. NPCI’s arm NIPL is in-charge of spreading RuPay and UPI to other countries.

Here are some of the broad initiatives and events:

• Bilateral trade settlement in INR: Traditionally cross-border settlements are done in USD. Now a few countries have agreed to use INR for cross-border settlement.
• UPI and RuPay acceptance in various countries: Singapore, Bhutan, Maldives, Bahrain, UAE, Saudi Arabia, France, Oman and UK. First use case is that Indian travellers can make payments in those countries using UPI or RuPay.
• Bill payment for NRIs: Non-Residential Indians can now make bill payment via BBPS (Bharat Bill Payment System). At present, it is available in the UAE on Lulu exchange. And I am sure more countries will be added
• eRupee (CBDC): This can be of great value in cross-border remittances (for now, in theory)

3. Big Launches and important features:

We witnesses few big product launches

Read more: CBDC, UPI Lite

Here are a few upgrades to existing products:

• Mandate Limit change: Maximum amount per debit on both SI on cards and UPI AutoPay is changed from Rs.5,000 to Rs.15,000
• UPI AutoPay: NPCI added two important features for UPI AutoPay that are important for NBFCs/lending sector. (a) Covered under negotiable instruments act (same act that covers cheque bounce) (b) Users cannot revoke the mandate on TPAPs (basis the lending MCC)
• UPI Auth and multiple debit: UPI 2.0 has a one time mandate which has limited use cases or to be precisely suited for IPO subscription. Now, UPI will have one time authorisation but multiple debits. It can be useful for frequent purchase use cases e.g., quick commerce, food delivery or radio cabs
• Consent for location for UPI: Mandatory for TPAPs to get user’s consent before getting location details. If the user doesn’t give consent then also UPI should work.
• UPI Number: TPAPs (PhonePe, G Pay etc.) to provide feature for users to choose a UPI number (apart from UPI ID/VPA) to bring consistency in transfer to mobile number when payee and payer are using different TPAPs.
• GSTN is included as FIP (Financial Information Provider) in Account Aggregator (AA). This makes underwriting of MSME lending easier. [Read about: Account Aggregator]
• Increased horizon of BBPS: BBPS is used for classic bill payment cases (e.g., utility bills, insurance premium payment, NBFC repayment). Then mobile recharge was included. Now, BBPS is open for other use cases such as school fees, rent repayment etc. [Read about: BBPS]
• BHIM App open source licence model — Any regulated entity can licence the code from NPCI to build UPI App.

4. Big guidelines/Extensions:

a. Digital lending Guidelines:

Lending… the holy grail (or only grail) of FinTechs.

Armed with regulatory arbitrage, FinTechs came up with various lending, disbursement and acceptance models. With various regulations, RBI stopped those. [Read article]

With the aim to clean up digital lending, RBI issued digital lending guidelines [Read Here]

b. Credit Card + Co-branded cards

Major guidelines on credit card issuance including co-branded credit cards. Focus on transparency, data privacy and customer safety. [Read Here]

c. Extension of 30% Capping on TPAP

NPCI wanted to restrict each TPAP (PhonePe, G Pay) to 30% of UPI transactions. Deadline for this was 1st Jan 2023. Although it is a good move (avoid too big to fail scenario), it is not an easy one to implement.

Big question was what will TPAPs do? And there were many theories about possible ways to limit… and…and…

NPCI gave a 2 year extension … Cool… for the next two years… 30% capping is not a serious problem but just an interview question.

5. Pricing:

• Once again, there was debate regarding UPI charges. RBI called for public discussion on charges of various payment modes (including UPI). But within a couple of days, GOI stepped in and clarified that UPI will not be charged in the name of public good.
• UPI + Credit Card: It will be ‘free’ for small merchants up to Rs.2000 and for other categories/merchants — there will be some charges (definitely not zero).
• NPCI directed Payment Apps not to charge fee on BBPS (i.e. bill payments)

6. Fraud Prevention:

a. Fraud Registry:

Did you read my article about ‘Dark Side of Digital Payments’?

At the end of the article, I have mentioned that the RBI should build a negative list (similar to sanction list) of fraudulent merchants and users.

Ta… da… RBI announced about building the fraud registry… This is a bit different than what I was talking about but who cares… this is my personal Nostradamus moment!!!

b. TRAI (Telecom Regulatory Authority of India) is planning to come up with a framework to show the name of the caller as per KYC document that is used while getting the connection.

7. Missleneous

• Standard Icons: Payment Council of India (PCI) is standardising payment icons so users will know that it is a genuine site. Not sure how effective it will be in preventing frauds but any sort of standardisation is always welcome!
• After ~15 months, RBI lifted the embargo of Amex. Now, Amex can onboard new customers. Looks like everyone (HDFC, Diners, MasterCard, Amex) is out of the woods!

That’s it for 2022… Wish you all Happy New Year!