Digital Payments Innovation in Regulation to Manage Disruption

Published in
5 min readNov 11, 2017


We participated in 5th Biennial Competition, Regulation and Development conference on 09–11 November, 2017 in Jaipur, India organized by CUTS and CUTS Institute for Regulation & Competition. On a session on Digital Payments Innovation in Regulation to Manage Disruption, we were asked to provide perspective of consumers and merchants on digital payment landscape.

CUTS-CCIER also released a research report on competition assessment of digital payments landscape in India which can be accessed here

I would like to begin by thanking CUTS and the Chair, for giving the opportunity for sharing consumer perspectives on this digital payments discussion. As a brief introduction, CashlessConsumer is a civil society group with aim of making consumers a stakeholder in design, technology, policy, regulation of digital payments to progress towards a fair cashless system. We work on decoding digital payments landscape for consumers through awareness, understand and provide feedback to technologies behind, seek / create open-data related to payments and give policy / regulatory feedback.

Q1. It appears that while urban users (merchants and consumers) are flooded with digital modes of digital payments (cards, mobile banking, wallets, Aadhaar), the availability reduces with increase in rural socio-economic settings of users. This situation perhaps turns both potential urban (confusing multiple modes) and rural (lack of sufficient modes) users away from digital payments. Is this true? Is the situation expected to improve with implementation of recently introduced interoperability in India? What has been the experience in other countries?

Consumers: Availability of various modes of digital payments are usually determined through a combination of factors like industry, regulatory decisions, merchant readiness and market uptake, besides incentives to both merchant and consumers. It is true that availability is factor of socio-economic setting, but more often choices available doesn’t cater to the needs of both merchants / consumers. For instance, Aadhaar enabled Payment System is the only cashless mode of payment available in many rural settings and lack of availability of choice, of using the debit card of PMJDY, could possibly drive consumers to use cash due to biometric failure / reliability issues of AePS. On the other hand, there are far fewer / close to nonexistent avenues for a cardless, mobile-less aadhaar enthusiast in a city to make transaction using AePS. While multiple modes doesn’t cause confusion for consumers as they largely align with popular ones, supporting many modes through independent bank / non bank networks increase cost of business to merchants.

Interoperability at policy level is encouraged. UPI to a large extent is successful in interoperability for P2P payments though in its initial phases is restricted to banks. For merchant payments, Bharat-QR the solution which is slated to provide interoperability can be best described as convergence of multiple payment networks (4 card networks, UPI with wallets, AePS) on single QR code, where consumers have choice to chose the network, merchant doesn’t get a choice and mandatorily becomes part of all payment networks through a single acquirer, albeit with lesser effort. BharatQR also makes the merchant acquisition activity heavily bank-led and poses as unfair competition to PPI holders who have also been acquiring merchants and would potentially reduce the role of latter to mere issuers. This will lead to limited set of choice of acquirers for merchants.

India is uniquely placed when compared to rest of the world as it is only country with ‘legacy’ card infrastructure, modern infra eWallets and multiple inter bank platforms like UPI and Aadhaar Pay for retail payments. West is largely card based for merchant payments and device payment technologies like ApplePay, AndroidPay built on top of the same. China has deeper integration of payments with e-commerce, service delivery and fewer platforms though there is active interest in building interoperability but seems to be keeping banks and non banks separate.

Q2. What are the key challenges that users face in digital payments? It has been suggested that failure rates in digital payments are high, and the digital payment applications are not user friendly, costs are high and not disclosed transparently, and grievance redress is sub-optimal. Are these some of the key challenges faced by users in making digital modes for financial payments? How can these be addressed?


  • Physical Infrastructure & Payments Literacy :- Physical infrastructure in terms of power, high speed reliable connectivity and payment infrastructure like PoS is still hard to come by universally. Efforts like electricity for all households, Public WiFi address the physical infrastructure. Awareness related to payments, digital literacy, assisted support are needed. Producing more content in all forms, in various languages to increase digital payments literacy.
  • Failure rates & Grievance redress :- Very little data has been published on failure rates and consumers are having hard time in getting grievances resolved, more so when it comes to payments apps across networks. Even though dispute resolution, chargeback mechanisms are in place on paper, lack of regulatory oversight hinders effective consumer protection. There needs to be payment infrastructure consumer labeling, with defined QoS parameters around reliability, redressal duration, cost which will help consumers identify and differentiate payment products / platforms, instill competition while following same technical standards.
  • Trust & cyber security :- Lack of consumer trust and confidence, both at brand level as well as technological security is important factor making users switch to cash. Reliability, responsive support, adopting fair and straightforward messaging as opposed to detailed, arbitrary, complicated terms and conditions, policies increase consumer trust. Increased transparency, particularly in case of cyber security incidents, related to disclosure, remediation, fixing accountability, enforcement of penalties, criminal action increases confidence. To quote example, there has been no identification of criminals involved with Hitachi debit card breach, nor a detailed public report on investigation. This is worrisome.
  • Costs & Privacy :- Consumers are increasingly aware of both monetary and rights cost involved in digital payments and prefer non digital modes of payment. Transparency on monetary cost along with legal, regulatory framework for data protection and privacy are essential to be address concerns of consumers which include inflation due to excessive rent seeking,


  1. Cost of cash — Payments :- Small merchants feel increasingly burdened with cost of going digital including digital payments shifting on them and in small merchants resist going digital to be competitive in market, but face stiff competition from e-commerce in adopting digital. Healthy competition from non e-commerce payment providers is essential
  2. Support system, Tooling :- Merchants also need support, friendly, efficient systems and processes. Merchants would need better tools beyond SMS’s for the infrastructure light acceptance mode when it scales. The low MDR regime driven by e-commerce backed payment companies, means there are fewer incentives for anyone to build these for merchants.

Q3. Are adequate use cases available with respect to digital payments. Is the recently introduced P2P lending guidelines expected to facilitate creation of additional use cases? Credit has been long considered as hook for promoting digital finance. Will this now be possible in India? What has been the experience in other emerging economies?

Historically, mobile phone recharges, travel ticketing, retail has been strong use cases for merchant payments. With the introduction and promotion of BBPS, utility bill payments would contribute a little more. Development of web payment standards would lead to content based services through web, gig payments would be emerging use cases.

Introduction of e-Mandates in UPI is seen as an effort to reduce friction in recurring payments, helping P2P lending, investing, availability of EMI to whole new class of transactions, to users without credit card and expected to be key growth driver for digital payments. However digital payments need to build innovative products and solutions beyond the needs of credit industry for sustainable development.




Consumer awareness initiative in cashless era. We track the nascent #paytech industry in India and provide consumer perspectives, voice concerns