Digital Payments in India - a Bank-Led Approach to Digital Payments

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DIODE Workshop, Manchester Digital Payments in India - A Bank-led Approach to Digital Payments Saman Goudarzi April 2018 Contents 1. Timeline, key actors & policy documents 2. Examining digital infrastructure and payment products a. State of RuPay and digital banking through PoS and QR (BharatQR) b. State of IMPS, USSD (feature phone payments), UPI and BHIM (government of India flagship payment app) 3. Concluding Remarks 2 Key Actors ● Reserve Bank of India (RBI) ● Banks: public & private (payment) ● The National Payments Corporation of India (NPCI) ○ Initial shareholder banks: State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Bank of India, Union Bank of India, ICICI Bank Ltd, HDFC Bank Ltd, Citibank N.A., and HSBC ● Fintech companies and social media companies 3 Key Policy Documents ● 2008, 2014: Mobile Banking Transactions in India - Operative Guidelines for Banks ● 2012: Payment Systems in India: Vision 2012-15 ● 2014: Master Circular – Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India 4 RuPay/RuPay Contactless ● Domestic card payment network launched in 2012 ● In 2015 was launched as an international card payment system (partnership with Discover card network) ● Growth of RuPay cards connected to Jan Dhan Yojana (financial inclusion program aimed at the poor) 5 RuPay Transactions 6 RuPay Transactions vs. Total Card Transactions 7 BharatQR ● QR code card payment service launched in 2016 ● Integrates Visa, Mastercard, American Express and RuPay ● POS replacement 8 Image source: http://www.afaqs.com/news/story/49916_The-making-of-the-Bharat-QR-logo-A-design-story Immediate Payment Service (IMPS) ● Platform to facilitate electronic interbank transfers launched in 2012 ● An alternative and more accessible model for electronic transfers vs. the older models of the National Electronic Funds Transfer (NEFT) and the Real Time Gross Settlement (RTGS) ● First model that didn’t require bank account info for transfers 9 IMPS vs. NEFT vs. RTGS - Value of Transactions 10 IMPS vs. NEFT vs. RTGS - Volume of Transactions 11 Unified Payments Interface (UPI) ● API for the IMPS ● Enables fintech companies to partner with banks and offer payment services from mobile devices ● NPCI controls which fintech companies get access 12 Unified Payments Interface (UPI) 13 Image source: https://blog.50p.in/understanding-upi-b6a4b57ccdfb UPI as Part of IMPS 14 BHIM Transactions as part of UPI transactions 15 BHIM Transactions as part of UPI transactions 16 *99# ● Financial inclusion product for mobile phones - no internet required ● Operates on the Unstructured Supplementary Service Data (USSD) channel ● Bank account holders would dial *99# and have access to simply banking services 17 *99# transactions vs. IMPS transactions 18 Concluding Remarks ● Adoption of digital payments is evident ○ Though by whom and for what kind of transactions is not clear from available data ● NPCI’s creation of an “open” controlled system enables them to foster regulated competition ○ Access to infrastructure is key 19.

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