The unveiling last week by the Reserve Bank of India (RBI) of a vision document for 2018 on payment and settlement systems only confirms the emerging contours of a revolution that has already begun, but it is welcome for the clarity it provides to enable a roadmap in which emerging financial technologies (fintech) can serve hundreds of millions of people in a short span of time at relatively low costs, thanks to the inclusive spread of mobile phones and innovations. The pragmatic move towards a “less-cash” economy (as a cashless economy can only be a distant dream) should also make more money flow into mainstream banking channels to boost economic growth.
The revolution we talk began quietly some years ago when a telecom service company pioneered a transferable “chhota recharge” in which pre-paid mobile customers could transfer recharge to each other through low-balance services. From there to mobile wallets and the recently authorised payment banks was only a logical journey. But there are hurdles to overcome and enabling regulations and practices needed to supervise new technologies all along the way, and that is exactly what the RBI’s paper envisions. The central bank document talks of “coverage, convenience, confidence, convergence and cost,” as the key 5Cs in the vision that involves creation of a payments infrastructure that ensures “interoperability and security.” A key step towards interoperability happened earlier this year when RBI governor Raghuram Rajan and unique identification system creator Nandan Nilekani unveiled the Unified Payments Interface linked to Aadhar unique ID numbers for millions of people to easily and confidentially do digital money transfers.
The RBI is trying to take forward Aadhar as a verification standard for payments. Payments in the digital age are easy but bring with it the threat of frauds that need to be minimised. The RBI aims to ensure all ATMs to migrate to EMV chips. EMV (short for Europay, MasterCard and Visa) is a new global standard for cards in which safer computer chip authentication will replace magnetic stripe verification. Overall, the RBI document appears to speak of an alert, flexible approach to embrace emerging technologies to enable the 5Cs. We can only add a sixth C to that: “Cheers!”