The central bank of India had invited suggestions on the authorisation of new retail payment networks on January 21.
The suggestions RBI received included lowering the barrier of entry in retail payment and promoting bulk payment networks like RTGS (real time gross settlement). The global payment firms also endorsed against the consolidation of the sector.
Visa and MasterCard welcomed the RBI’s move to open up the retail payment sector.
“Consider encouraging new players to participate in and promote pan-India payment platforms, such as real-time payments (RTPs) and bulk and repetitive payments, to foster innovation and competition. The criteria for licensing should be based on principles that allow entry in retail payment systems in an open and competitive manner to the entities having proven robust capabilities,” Visa said in a note shared with the RBI, ET reported.
MasterCard said it view the initiative as an opportunity for new companies to enter the space and help innovation to flourish.
National Payments Corporation of India (NPCI) handles systems such as Unified Payments Interface (UPI), Immediate Payment Service (IMPS) and National Automated Clearing House.
“This will also ensure that no single payment system has an undue advantage over others — any imbalance created by regulatory could lead to increasing systemic risk,” said Visa.
Visa said the RBI needs to strike a balance between monopolisation of platforms offering retail digital payments on the one side and allowing a ‘multitude’ of players on the other, according to an ET report.
“With the RBI opening retail payment networks for other participants, what was dominated by NPCI will now allow other players to come in as well. The regulator has thought about it from the angle that concentration risk in NPCI has grown manifold and there is a need for other UPI like platforms to emerge” a senior banker told ET on condition of anonymity.
UPI transactions amounted to 800 million in March to the tune of Rs 1.3 lakh crore. On the other hand, IMPS clocked 190 million transactions worth Rs 1.7 lakh crore in the same month.
“This is just the tip of the iceberg. Once adoption of digital payments goes beyond the top 100 million or so, there will be huge stress on a single platform. Therefore multiple platforms will help dissipate the concentration risks,” the banker said.