Payment Vision 2025: Reserve Bank of India

Raghvendra Sonker

07 Jul, 2022

Since 2001, the Reserve Bank of India has been providing strategic directions and implementation plans for building a robust payment ecosystem in India. The Payment Vision 2025 released by RBI will ensure secure, reliable, accessible, efficient and affordable payment systems.These measures elaborated under the Payment Vision 2025^[1] document will enhance the financial security in rural areas and can bring a more focused approach towards digital and financial literacy.

Significant Achievements of Payments Vision 2019-2021

The Payment Vision 2025 also elucidates the accomplishments of Payment Vision 2019-2021 by adhering to the roadmap provided under the document. Some of the significant achievements are listed below:

• The creation of a framework for a regulatory sandbox allows FinTechs from India to test their products without any regulatory compliance. Ensuring the significant presence of domestic payment system at international platforms.
• Increase in Phone-Based Payment services.
• Relaxation was granted over the fee levied by RBI for Real-Time Gross Settlements RTGS and National electronic Funds Transfer (NEFT) systems and their availability on a 24x7x365 basis.
• Regular review of Interchange fees on use ATMs.
• E-mandates for recurring financial transactions using cards / UPIs / PPIs.
• Framework for regulating Payment Aggregator
• Tokenisation of card transactions and Card-on-File Tokenisation
• Establishment of Centralised Payments Fraud Information Registry (CPFIR)
• JAM trinity (Jan Dhan, Aadhaar and Mobile)
• Increase in mobile and internet banking users by 99% and 18%, respectively.
• Reduction in use of Paper based instruments.

New Payment Vision Document 2025

The core theme of RBI’s Payment Vision 2025 is ‘E-Payments for Everyone, Everywhere, Everytime (4Es). The document envisions 6 attributes to provide every e-payment user with secure, fast, convenient, safe, affordable and accessible e-payment options.

The Payment Vision 2025 establishes the RBI’s approach toward facilitating users with less digital experience.The Payment Vision 2025 document aims for India to become a global power in Digital Payments. The RBI’s Payments Vision 2025 document is presented across the five pillars of Integrity, Inclusion, Innovation, Institutionalisation, and Internationalisation.

Integrity

1. Due to growing concerns over the OTP-based authentication in terms of cases of Phishing/ Vishing and different Smishing models. An Alternative Authentication Mechanism for Digital Payment Transactions has to weave in for more secure transactions.
2. To ensure greater transparency and precision over unique identification and adoption of a single identity for an entity across multiple platforms. The RBI aims to broaden the scope, and relevance of Legal Entity Identifier (LEI) in areas like Know Your Customer( KYC), fraud detection etc. In all payment activities.
3. Expand Inter-operability to Contactless Card Payments in Offline Mode
4. Enhance Scalability and Resilience of Payment Systems
5. Support Online Dispute Resolution (ODR) System for Fraud Monitoring and Reporting
6. Provide enhancements to Central Payments Fraud Information Registry (CPFIR)
7. Provide Payee Name Look-Up for Fund Transfers
8. Increase Proportionate Oversight of Payment System Operators’ (PSOS)
9. Include Assessment of RTGS and NEFT Under Principles for Financial Market Infrastructures (PFMIS)
10. Explore Local Processing Of Payment Transactions
11. Study Related to the  Creation Of Digital Payments Protection Fund (DPPF)

Inclusion

1.  To Enable Geo-Tagging of Digital Payment Infrastructure and Transactions
2. Regular review of guidelines for Prepaid Payment Instruments (PPIs).
3. Regulation of All Significant Intermediaries in the Payments Ecosystem and formulating feasible structures for Domestic and International markets.
4. Introduce enhancements to Cheque Truncation System (CTS), including One Nation One Grid Clearing and SettlementPerspective
5. Extend Internal Ombudsman Scheme to All Payment System Operators’ (PSOs)
6. For Supporting Increase in Market Trading and Settlement Hours
7. Upscale Customer Outreach and Awareness Activities
8. Revisit Scope and Usefulness Of Payments Infrastructure Development Fund (PIDF) Scheme
9. Regulation of Big-techs & Fin-techs in Payments Space
10. Continued Attempt for Collection and Publishing Granular, Disaggregated Payment Systems Data
11. Make Payment Systems More Inclusive
12. Undertake Review of Charges for All Payment Systems
13. Co-ordinate Migration of Govt. Receipts and Payments to Digital Form

Innovation

1. Facilitate Framework for Internet of Things (IoT) and Context-Based Payments
2. Migration of  all RBI-operated Payment System Messages to ISO 20022 Standard
3. Linking Credit Cards and Credit Components of  Banking Products to Unified Payments Interface  (UPI)
4. Creation of Payment System for Processing Online Merchant Payments using Mobile Banking/  Internet
5. Organise Payment Innovation Contests and Hackathons
6. Review Need for Multiple Payment Identifiers
7. Exploringappropriate guidelines for payments involving BNPL(Book Now Pay Later) Services

Institutionalisation

1. Institutionalised Review of Legislative Aspects of Payment And Settlement Systems Act Provisions And Regulations
2. Constitute Payments Advisory Council (PAC) to Assist Board for Payment and Settlement Systems (BPSS)
3. Operationalize National Card Switch for Card Transactions At POS And Resultant Settlements
4. Active Engagement and Involvement at International  Platforms (Discussions for Setting Bodies)

Internationalisation

1. Global Outreach for Transactions based on  RTGS, NEFT, UPI And Rupay Cards
2. ExpandStructured Financial Messaging System (SFMS) and Indian Financial Network (INFINET) Frameworks Across Jurisdictions
3. 2FA for Cross-Border Card Transactions
4. Seek Adoption of INR in Continuous Linked Settlement (CLS)
5. Bringing more Efficiency in Payment Processing and Settlements on Introduction Of Central Bank Digital Currencies (CBDCs) – Domestic And Cross-Borders

The five goal-posts of Payment Vision 2025 shall have the following 10 expected outcomes within the Vision Period:

i. Volume of cheque-based payments to be less than 0.25% of the total retail payments;

ii. Threefold increase in the number of digital payment transactions;

iii. UPI to register average annualised growth of 50% and IMPS / NEFT at 20%;

iv. Increase of payment transaction turnover in relation to GDP (Gross Domestic Product) to 8;

v. Increase in debit card transactions at Point of Sale by 20%;

vi. Debit card usage to surpass credit cards in terms of value;

vii. Increase in PPI transactions by 150%;

viii. Card acceptance infrastructure to increase to 250 lakh;

ix. Increase of registered customer base for mobile-based transactions by 50% CAGR; and

x. Reduction in Cash in Circulation (CIC) as a percentage of GDP.

Conclusion

India has been continuously working on achieving financial inclusion in India to bring financial stability and economic development. This document will act as a yardstick for all the stakeholders (FinTechs and Payment Players) and will encourage them to enhance their potential by aligning with RBI’s vision.

Read our Article: RBI releases framework for geo-tagging of payment system touchpoints