In an environment where digital transactions are heavily concentrated – with the nation’s banks handling a significant share – India’s central bank is hoping to encourage more players to enter the market.
The Reserve Bank of India (RBI) released a statement on a broad set of regulatory policy priorities last week, and encouraging competition – and ultimately, innovation – within the payments sector was on the list.
“With the maturing of the retail payments market, it is important that the concentration risk in retail payment systems is minimized from a financial stability perspective. The Reserve Bank plans to encourage more players to participate in and promote pan-India payment platforms so as to give a fillip to innovation and competition in the sector,” the bank said in the statement.
An article in the Economic Times cited RBI data saying that India’s banks currently have almost 99% of the transaction share in terms of value.
The RBI said it plans to issue a policy paper on the issue by the end of September. Non-bank payments providers – including India-based payment facilitators – have already begun weighing in, according to media reports.
MobiKwik Chief Executive Bipin Preet Singh said in the ET article that banks and non-banks have partnered to provide innovative solutions but could do more.
“An initiative like BharatQR is heavily dependent on banks, but I believe non-banks could play a very important role in taking it to merchants and promote offline digital payments,” Singh told the publication.
A link between the formal financial system and merchants – many of which may be small businesses, often geographically distributed – is a need that payment facilitators are well suited to fill.
As PaymentFacilitator has previously noted, many in the payments system see payment facilitation as a cost-effective way to expand financial inclusion in areas that are building up their digital payments infrastructure.
An article in TheWeek quoted Amit Kapoor, founder of India-based payment facilitator Airpay, on his reaction to the RBI statement.
“The cost of reaching out to smaller towns has to come down, which will then encourage small ticket transactions. And of course, there needs to be lot of handholding and awareness for people to adapt it,” Kapoor said.