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Open Forum on Open Banking Dublin, 20th June 2017 ERPB Working Group on PIS - Status Thomas Egner Secretary General, Euro Banking Association The journey so far 3 weinars O. Operational & technical matters PIS-WG Interface Identification 5 Meetings of the ERPB Working Group on Payment Initiation Services (PIS) October 2016 May 2016 Stakeholder November 2016 Report of the ERPB meeting on payment Working Group on initiation services - Mandate of the ERPB Payment Initiation June 2016 ECB Working Group on Pay- Services (PIS) 7th ERPB Meeting ment Initiation Services (PIS) 2016 2017 Today ERPB Working Group on Payment Initiation Services The working group needs to continue ist task • Technical Aspects • Operational Aspects • Business Practices Outcome of the Working Group: 9 recommendations addressed to different players Provide further clarification in relation to passporting, liability KEY FINDINGS Clarify the liability framework regime and insurance ✓ Maintaining trust. ✓ Providing the information Promote timely establishment of Qualified Trust Service Providers necessary for the effective Define harmonised framework for operation of PIS. the testing of interfaces (QTSP) across the EU ✓ Avoiding fragmentation at European level. Design a shared directory ✓ Ensuring clarity of the liability Adress the open question on data infrastructure for ASPSPs and elements (which, format, were to framework and regulatory TPPs and determine content and store) to be used in a certificate plus modus operandi requirements. the obligations of QTSPs Produce an operational guide describing Define modus operandi for the Develop the requirements for a how registration, certificate handling, provision of such information and standardised ASPSP-TPP dispute notification and exiting processes should handling process to ensure work in a harmonised way across investigate other fraud mitigation countries in the EU actions harmonisation on a pan-European level Parallel to the ERPB the industry presses ahead - recent press releases Javier Santamaría Chairman, European Payments Council James Whittle Director International Standards and Services, Payments UK Russ Waterhouse EVP Product and Strategy, The Clearing House Parth Desai Founder and CEO, Pelican Digital India – Potential & Pitfalls Parth Desai Founder & CEO, Pelican Key drivers for the Indian digital economy 1. SOCIAL ➢ Subsidies fully not reaching the needy ➢ Lack of Financial Inclusion (especially poor and rural India) 2. FISCAL ➢ Reduce usage of Cash based transactions (out of ambit of taxation authorities) ➢ Reduce avenues for use of black money like gold & properties etc 3. REDUCE COSTS USING TECHNOLOGY ➢ Leveraging on vast use of mobile phones (Total 730m, smart phones 340m) ➢ Biometric technologies matured, available for security and KYC 4. BUILD ROBUST BANKING INFRASTRUCTURE ➢ Several large banks are nationalised with e-systems ➢ Central Payments Body - NPCI OVERVIEW of GOVT DIGITAL OFFERINGS IN INDIA 2005 2009 2005 2011 2010 2012 2014 2017 2016 2011 2016 2016 2016 Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM The following are few initiatives introduced by NPCI boosting Digital payments in India: 1. RTGS – REAL TIME GROSS SETTLEMENT Real time transfer from one bank to another on "gross" basis but settlement in "real time” 2. NEFT – NATIONAL ELECTRONIC FUNDS TRANSFER Facilitates one-to-one funds transfer for individuals / corporate, batch settlements at hourly intervals 3. IMPS – IMMEDIATE PAYMENT SYSTEM Round the clock funds transfer services as it operates 24*7 4. UPI – UNIFIED PAYMENT INTERFACE Integrates multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one platform 5. BHIM – BHARAT INTERFACE FOR MONEY – MICRO ATM`s App using Unified Payments Interface (UPI) to make instant bank-to-bank payments and Pay and collect money using just Mobile number or Virtual Payment Address (VPA). Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM 6. NACH – NATIONAL AUTOMATED CLEARING HOUSE Web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature, used for paying and collecting bulk transactions (low value, high volumes ) 7. NUUP – NATIONAL UNIFIED USSD PLATFORM Unstructured Supplementary Service Data PLATFORM (*99# service) - Enabling banking customers transact using ANY mobile phone through an interactive menu displayed on the mobile screen. 8. AEPS – AADHAR ENABLED PAYMENT SYSTEM Empowers a bank customer to use Aadhaar as his/her identity to access his/ her respective Aadhaar enabled bank account and perform basic banking transactions through a Business Correspondent. 9. APB – Aadhaar Payment Bridge system Electronically channelizing the Government subsidies and benefits in the Aadhaar Enabled Bank Accounts (AEBA) of the intended beneficiaries Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM 10. BBPS – BHARAT BILL PAYMENT SYSTEM “Anytime anywhere” interoperable Bill Payment System by providing integrated platform connecting banks and non-banks in bills aggregation business, Billers , payment service providers and retail bill outlets 11. BHARAT QR (Common QR Code) Allows all the merchants to receive digital payments without the use of Point-of-Sale (POS) swiping machine using a smart phone to the merchant bank account. 12. RuPay A new debit card payment scheme Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM Other Players & Instruments 1. PAYMENT BANKS Performs most banking operations but can't advance loans or issue credit cards. It can accept demand deposits (up to Rs 1 lakh), offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers (e.g. AIRTEL, VODAFONE, INDIA POST , ADITYA BIRLA NUVO LTD etc.) 2. E- WALLETS Electronic Wallets (PAYTM, JIO MONEY, CITRUS WALLET, FREECHARGE, MOBIKWIK etc.) 3. PREPAID BANK CARDS Works on the theme of pay now and use at your convenience, very similar to prepaid mobile phone cards. 4. POINT OF SALE - (Mobile, Physical , Virtual) 5. BANKING CARDS - (Credit /Debit Cards ) 6. Micro ATMs – PoS style devices for collection and delivery of cash via human correspondents OVERVIEW of DIGITAL BANKING IN INDIA India Stack – OPEN API to digital infrastructure ➢ Cashless ➢ Paperless ➢ Presence-less ✓ Governments, ✓ Businesses, ✓ Startups and ✓ Developers Incentives & efforts to Promote Digital Payment INCENTIVES • 10% discounts at fuel purchase, highway tolls, rail tickets and insurance premiums • No service tax on all digital transaction up to Rs. 2,000 • PSBs advised to reduce PoS rentals to Rs. 100 per month • Free accident insurance cover of up to Rs. 1 million for online rail tickets • No transaction fees for payments made through digital means by Central Government Departments and PSUs EFFORTS • 100,000 Villages to be provided with at least 2 PoS machines • Regional Rural Banks & Cooperative Banks to issue 43,2M “Rupay Kisan Cards” Key challenges facing digital India 1. CASH HABIT - A large percentage of population still are habituated to use cash 2. COMPLEXITY OF USE - Many digital product complex – elderly and less literate population 3. LACK OF BENEFITS - Lack of compelling benefits or advantages of using digital payments 4. INCONVENIENT - Perceived inconvenience and prone to errors (high rate of illiteracy) 5. NO INCENTIVES - Lack of incentives to use digital payments especially in rural India 6. SECURITY ISSUES - Lack of robust security features by the regulatory authorities 7. RURAL REACH - Government not effective in ensuring reach into rural areas 8. AADHAAR CONCERN - Use of Aadhaar card in multiple applications (“”Big Brother” issue) FINTECH & THE BANKING ECOSYSTEM Four drivers for the transition from mutual suspicion to engaged collaboration. 1. OPEN INNOVATION • The traditional bank closed proprietary approach is ill-suited to the open architectures of today. • Open API framework of PSD2 reinforces the collaborative and interoperable environment that financial services must operate to win customer support and trust 2. COLLABORATION • Banks and Fintech occupy opposing cultures of completely different development cycles (slow build v rapid development / Proven and tested v experimental and novel) • Banks benefit from collaborating with different non-traditional sectors to harness their intellectual creativity and vitality • Fintechs benefit and leverage the deep domain knowledge that the banking sector possesses FINTECH & THE BANKING ECOSYSTEM 3. PARTNERSHIPS • Expansion of the digital economy - core consumer and business touchpoints are digital channels and mobile devices • Increased willingness by banks to strategically partner with Fintechs to engage with these channels 4. DATA INSIGHTS • Value from customer insights utilising data science and predictive analytics • New innovative service and product opportunities that leverage customer big data and derive context from payments • Approach harnesses core banking domain expertise and technology innovation of Fintechs Thank You Have a good EBAday ! For any comments or questions, please contact us at [email protected] Open Forum on Open Banking 20th June 2017 25.