Vision Document: RBI sees digital payment transactions trebling by 2025

The number of digital payment transactions should treble by 2025 and the Unified Payments Interface (UPI) should register an average annualised growth of 50% by then, according to the Reserve Bank of India (RBI).

The central bank expects the Immediate Payment Service (IMPS) and National Electronic Funds Transfer (NEFT) to grow at an annual average of 20%. These are among 10 specific outcomes to be achieved by India’s payments industry over the next three years as part of its Payments Vision document for 2025, the central bank said on Friday.

The vision document took note of the proliferation of Buy Now, Pay Later (BNPL) services which, it said, has developed into a new payment mode alongside the existing payment modes like cards, UPI, and net banking.

“This novel method shall be examined, and issuance of appropriate guidelines on payments involving BNPL shall be explored,” RBI said.

Among other outcomes are a reduction in the volume of cheque-based payments to less than 0.25% of the total retail payments. The industry should target increasing its payment transaction turnover vis-à-vis gross domestic product (GDP) to eight and debit card transactions at point of sale (PoS) by 20%. Debit card usage is to surpass credit cards in terms of value while transactions through prepaid payment instrument (PPI) should rise 150%, says the document.

It further says that card acceptance infrastructure is to increase to 25 million and the registered customer base for mobile-based transactions is to grow 50% on a compound annual growth rate (CAGR) while cash in circulation (CIC) as a percentage of GDP is to be reduced.

The regulator also laid out a set of specific initiatives for the industry. Considering emerging concerns with OTP-based authentication in terms of increasing cases of divulgence of customers’ confidential details, alternate risk-based authentication mechanisms leveraging behavioural biometrics, location, historical payments, digital tokens and in-app notifications shall be explored, the RBI said.

The use of legal entity identifiers (LEI) in areas like sanctions screening, know your customer (KYC), corporate invoice reconciliation and fraud detection shall be explored.

The possibility of interoperability for contactless transit card payments in the offline mode shall be explored to facilitate seamless travel with a single payment instrument usable across different transit operators. A more evolved system for monitoring and reporting of frauds will be worked on.

“To leverage on the payment frauds reported in the Central Payments Fraud Information Registry (CPFIR), it is essential to move towards real/near real-time reporting of payment frauds and put in place an integrated platform for all stakeholders (payment system operators and participants – banks and non-banks, law enforcement agencies, etc.) to share information and initiate necessary corrective action to prevent frauds,” the document said.

The regulator said there have been complaints about credit to unintended beneficiaries due to inadvertent wrong account number entries. Hence, introduction of payee name look-up, a service for checking the beneficiary’s actual name, shall be explored for other fund transfer systems such as RTGS, NEFT and IMPS. A comprehensive review of all aspects related to charges involved in various channels of digital payments shall be undertaken, the RBI added.

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