Payment Vision 2025

The Reserve Bank of India (RBI), in a document for payments systems, outlined its vision on the architecture of digital finance- Payments Vision 2025.

About the Payment Vision 2025:

The journey of payment systems in India has been phenomenal in the recent couple of years.

• Payment systems promote economic development and financial stability and support investment. Ensuring secure, reliable, affordable, and effective payment systems have been the strategic objectives of the Reserve Bank of India (RBI).
• Payments Vision 2021 aimed to give all Indians the power to access a wide range of electronic payment options, secure, convenient, fast and affordable, and set four goals in Competition, Cost, Easy and Confidence.
  
  
• Payment Vision 2025 has the core theme of (4Es).
• The vision comes with the aim of providing a strategic direction and implementation plan for the formal development of payment and payment systems in India through the periodic versions of Payments Vision, which was launched from 2001.

Vision of the draft

• Digital Payment Geo-tagging: The RBI text has proposed the adoption of digital payment geo-tagging services and functions as well as a review of prepaid toolkit guidelines (PPIs), including closed system PPIs.
• Control of all key intermediaries: The RBI also proposed a regulatory framework for all key intermediaries in the payment ecosystem and linked credit cards and credit components of banking products to the UPI.
• Check Truncation System (CTS): Other proposals include bringing enhancements to the Check Truncation System which includes One Nation One Grid specification and payment concept, and creating an online payment processor to process online merchant payments using mobile and mobile banking.
• BigTechs Control: The RBI also proposed control of BigTechs and FinTechs in the payment system.
• Buy-now-pay-later (BNPL) systems: BNPL services have evolved into a new payment mode next to existing payment methods such as cards, UPI, and bank balances.
• Triple override: Requires a triple override on the number of digital payments, increased debit card usage and less cash used.

Significance

• Easy to use and convenience: It will empower users with affordable payment options that can be accessed anytime and anywhere easily.
• Digital community: A trip to a low-income community with small cards.
• Global leader: This will strengthen India's position as a world leader in the digital payment system.
• Increased mobile banking: With the change in customer behaviour in accepting digital and tactile payment methods, in part due to COVID, there is a 50% increase in mobile banking users, indicating the inclusion of first-time digital users in the digital company.
• Expand RTGS: The RBI will look at whether it is possible to extend the RTGS to facilitate trade in major trading currencies such as the dollar, pound, and euro, and will also be considered through bilateral or multilateral programs.
  
  

Five major Goalposts of the Initiative

• Integrity
  • Weave in alternative authentication mechanism(s) for digital payment transactions
  • Broaden scope, usage and relevance of lei in all payment activities
  • Expand inter-operability to contactless transit card payments in offline mode
  • Enhance scalability and resilience of payment systems
• Inclusion
  • Enable geo-tagging of digital payment infrastructure and transactions
  • Revisit guidelines for PPIs including closed system PPIs
  • Consider framework for regulation of all significant intermediaries in payments ecosystem
  • Extend internal ombudsman scheme to all PSOs
• Innovation
  • Facilitate framework for IOT and context-based payments
  • Migrate all RBI operated payment system messages to ISO 20022 standard
  • Link credit cards and credit components of banking products to UPI
  • Create payment system for processing online merchant payments using internet / mobile banking
• Institutionalisation
  • Comprehensive review of legislative aspects of payment and settlement systems act provisions and regulations
  • Constitute payments advisory council (PAC) to assist BPSs
  • Operationalize national card switch for card transactions at POS and resultant settlements
  • Active engagement and involvement in international fora (discussions of standard-setting bodies)
• Internationalisation
  • Global outreach of RTGS, NEFT, UPI and Rupay cards
  • Expand SFMS and INFINET frameworks across jurisdictions
  • Seek inclusion of INR in continuous linked settlement (CLS)
  • Bring further efficiencies in payment processing and settlements on introduction of CBDCS – domestic and cross-border

Potential issues and challenges

• Geo political risk: The document also addresses the filing of domestic payment systems, which includes the need to authorize the consideration of domestic payment services, due to the emerging risks of the country.
• Fraud: with the increasing adoption of digital payment methods there will be an increase in digital payment fraud.
• Domestic data retention: Banks and non-banking PSOs are allowed to process payments abroad under certain circumstances.
• Costs on digital payments: The Reserve Bank will also conduct a comprehensive review of all aspects of the costs involved in various digital payment channels.

Payment systems foster economic development and financial stability as well as support financial inclusion. 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). Towards the pursuit of these objectives, India has developed one of the most modern payment systems in the world, be they large value, retail or fast.