Expressing concerns of concentration in the retail payments space, the Reserve Bank of India has invited public views on opening up the payment space to encourage innovation and competition.
The central bank sense a need for a multi-pronged action to strengthen the retail digital payment systems. It plans to encourage more players to participate in and promote pan-India payment platforms.
The objective is to minimise the concentration risk in the retail payments market, from a financial stability perspective and to give a fillip to innovation and competition, notes RBI’s policy paper on Authorisation of New Retail Payment Systems.
The RBI study further said that the NPCI has become pivotal to the operations of many retail payment systems in India. This has led to a concentration of many complicated systems and tasks under its ambit, which could lead to complacency and hindrance in innovation.
In October 2018, NPCI has processed nearly 48 per cent of the retail electronic payment transactions (excluding paper) in volume aggregating to 15 per cent of the value of retail electronic payment transactions, the release added.
It also expressed concern on the lack of NPCI falls back arrangements in case of a data breach or negative financial event. In the last few years, the payment systems operated by NPCI has outnumbered RBI in all electronic transactions.
The RBI sees the allowance of multiple players to operate similar payment services as one of the solutions. It acknowledged that the process may need additional investment and infrastructure.
The central bank has sought views from the public by February 20.
Last month, the RBI had announced a ‘Survey on Retail Payment Habits of Individuals (SRPHi)’. The survey sought qualitative responses from 6k individuals on their payment habits in six cities.