Technology Is Key To Achieving Robust Payments Infrastructure: RBI

In its bid for ensuring smooth operations and proper conduct of payment systems, the Reserve Bank of India (RBI) has issued a Vision Document related to the same. Safety, security, soundness and efficiency with accessibility and authority of the payment systems are of critical importance. The vision document is a guide book about the payments and settlement system-related activities of RBI.

In the vision document, RBI has highlighted the scope of achieving a robust payment and settlement infrastructure through technological tools. Prepaid Instruments, Voice, Internet and Mobile payment systems and dynamic online presence are some of the technical skills which are acknowledged in the vision document.

Internet and Mobile Association of India (IAMAI) has welcomed this initiative of RBI. In an official statement issued after the release of this vision document of RBI, IAMAI has expressed positive hopes of achieving systematic stability of the existing financial system. Dr Subho Ray, president IAMAI, said, “Smooth functioning of payment systems becomes vital in the light of inter-linkages they have with other financial systems. In today’s context, mobile technology clubbed with robust online presence could contribute significantly in this direction.”

According to the newly introduced vision statement, outreach of existing payment system products should be enhanced geographically and more segments of the populace in the country shall continue to be focused upon.

As per the vision statement, the major projects that are intended to be pursued for achieving systematic stability are:

• Implementing a new and feature-rich RTGS system - The need to migrate to a new version of RTGS that could leverage on advancements in technology, provide for scalability in volumes, parameterise more features in line with similar facilities available in other countries, result in more flexibility in operations, better liquidity saving features, etc., would be pursued.

• India Card - A domestic card initiative - The concept of a domestic payment card (India Card) and a PoS switch network for issuance and acceptance of payment cards would be looked into. The need for such a system arises from two major considerations. The first is the high cost borne by Indian banks for affiliation with international card associations in the absence of a domestic price setter. The second is connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90 percent of the total, through a switch located outside the country.

• Redesigning ECS to function as an Automated Clearing House (ACH) for bulk transactions - Currently, local ECS (to facilitate bulk electronic transactions with one-to-many and many-to-one variants) is operational at 76 centres. Centralisation of this process is already underway with the launch of credit variant of NECS at Mumbai (and RECS on a pilot basis). The debit variant is also being planned for implementation. The ECS/ NECS solution is internally developed and has been in use since long and the need for building a technology and feature-rich ACH network by totally re-designing the existing ECS to provide end-to-end processing in a straight-through manner would be examined.

• Mobile payments settlement network - Mobile phones are expected to emerge as an important channel for transmission of payment instructions. Efficient mobile payments would require a real-time transfer of funds with adequate security. Currently, all inter-bank mobile transfers are payment instructions for settling funds through existing payment systems. This would require building a national infrastructure for facilitating real-time mobile payments.