A five-member committee headed by former Unique Identification Authority of India (UIDAI) chairman Nandan Nilekani has envisioned a tenfold increase in the volume of digital transactions over the next three years, eventually triggering a decline in cash requirements.
The committee has submitted its report months after the Reserve Bank of India (RBI) had in January set up the panel to take stock of the digital payments ecosystem. The group comprising former bureaucrats and administrators met seven times and sought input from the government, payment system operators and the RBI, among others.
In all, the committee has compiled 73 recommendations covering multiple stakeholders including the RBI, the government, the Department of Telecommunications, the Telecom Regulatory Authority of India (TRAI), as well as the payments industry.
As per the report, the growth in digital transactions will be driven by low-value, high-volume and low-cost transactions over time.
The report also recommended risk-based, light-touch regulations for encouraging digital payments players to come up with viable solutions and market-driven services.
It also added that there should be no convenience fee charged on consumer-to-government digital transactions. The report further hinted at the standardisation of the BHIM-UPI protocol developed by the National Payments Corporation of India (NPCI), the umbrella body for digital payments, for use outside India.
Below are some of the other key recommendations of the report:
- RBI should become a better source of tracking and reporting accurate data on digital transactions.
- Creating industry-wide mechanisms to share data with customer consent, and using a KYC-compliant account to open another. Financial sector entities should come together with a data-sharing proposal based on verifiable user consent to share minimum KYC data, with adequate oversight and safeguards.
- RBI should set up a standing committee to review MDR or Merchant Discount Rate charged for processing debit and credit card transactions. The MDR and interchange fee should be revised periodically by the committee to create a level playing field.
- Non-banking players should be made part of payment schemes to encourage acceptance infrastructure. Settlements will continue to be routed through sponsor banks.
- Each merchant should support at least one of the digital modes of payment from Bharat QR Code, BHIM UPI QR or card-based transactions.
- Speedier resolution of customer grievances by all payment system operators including NPCI. Aggregate data on issues and resolution timelines should be published for regulators to check the health of the payment system.
- The regulator must monitor failed transactions and aim to reduce the number by 25% every year.
- To facilitate financial inclusion, innovative digital transaction products should be developed for the feature phone user base through RBI’s regulatory sandbox programme.
- Usage of disabled-friendly payment technology and support of vernacular languages at Points of Sale and ATMs, among others.
- Increasing the timings for the RTGS window and 24x7 operability for NEFT transactions.