Foreign payment firms Visa and Mastercard have appreciated the RBI move to open up retail payment sector for multiple players.
The move will help create a level playing field and encourage innovation in payment networks of the country, two of the payment firms said to RBI.
Visa, in a suggestion to the central bank, said that new players should be given licence based on their proven robust capabilities.
There should also be mechanisms in place to ensure they have international financial standards for anti-money laundering and know-your-customer requirements, it added.
It also calls for balancing act between the monopoly of a single player and allowing a multitude of players in the space.
Whereas Mastercard said that the RBI move will serve as an opportunity for new companies to enter the space and bring in innovation.
On January 21, seeking to minimise the concentration risk in retail payment systems, the RBI had invited public views on opening up the payment space to encourage innovation and competition.
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, said RBI’s policy paper on Authorisation of New Retail Payment Systems.
Over the years, 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 last year, NPCI had 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. In March alone, 800 million UPI transactions were processed, as per NPCI.
NPCI has single-handedly handled most of the retail digital payments.
However, the RBI had expressed concern on the lack of NPCI falls back arrangements in case of a data breach or negative financial event.
It sees the allowance of multiple players to operate similar payment services as one of the solutions.
The development was reported by ET.