In a 30-page document titled Payments Vision 2025, the Reserve Bank of India said it is aiming to triple the total digital payment transactions by 2025.
UPI is going to be the main driver of this growth as RBI expects UPI to register an average annualised growth of 50% in the next three years.
RBI said digital payments is more than mere technology, and that for consumers, adoption of digital payments depends on their lifestyle as well as on their comfort level with online transactions. To that effect, it wants to bring a slew of innovation and regulate BigTech, fintech, and buy now, pay later companies.
The Payments Vision 2025 report said, “There has been an increase in unique users of mobile banking and internet banking by 99% and 18%, respectively, between March 2019 and September 2021.”
The apex bank wants to make this rise in digital banking an irreversible shift without compromising on the integrity of payment systems. To that effect, it aims to bring fresh regulations for BigTech, fintech, and buy-now, pay-later companies, it said.
Goalposts of Payments Vision 2025
The RBI has proposed goalposts based on five themes: integrity, inclusion, innovation, institutionalisation, and internationalisation.
There are 10 initiatives that the RBI wants to bring in the coming years. They are as follows:
- Restrict the volume of cheque-based payments at less than 0.25% of the total retail payments
- Increase digital payment transactions by more than 3x
- UPI to register average annualised growth of 50% and IMPS / NEFT at 20%
- Increase of payment transaction turnover vis-a-vis GDP to 8
- Increase in debit card transactions at Point-of-Sale by 20%
- Debit card usage to surpass credit cards in terms of value
- Increase in PPI transactions by 150%
- Card acceptance infrastructure to increase to 250 lakh
- Increase of registered customer base for mobile based transactions by 50% CAGR
- Reduction in Cash in Circulation (CIC) as a percentage of GDP
The Payments Vision 2025 report further highlights various changes in the digital payments system.
- Regulation of payment intermediaries: RBI said digital payment intermediaries have been instrumental in facilitating payments between payers and recipients.
However, it wants to have uniformity in implementation of user onboarding processes and transparency in operations of intermediaries. RBI has issued instructions to regulate the activities of online payment aggregators (PA). It has also provided technology-related recommendations to Payment Gateways. The need to bring all significant payment intermediaries, including offline PAs, under direct regulation of RBI shall be considered.
- Guidelines for PPIs: RBI said Prepaid Payment Instruments (PPIs) have always intended to shift customer preference from cash to digital, and are important for the ecosystem. It wants to beef up security of transactions for PPIs to ensure their long term growth. “A comprehensive review of the different types of PPIs including timeline for full-KYC PPIs, definition of closed system PPIs, and the related aspects, shall be undertaken,” RBI said.
- Evaluation of payment system charges: RBI has taken cognizance of costs of providing digital payment services. It said, currently “they are borne by one or more of the payment system participants (switching fees, interchange fees, etc.) or are passed on to the merchant (Merchant Discount Rate) or the customer (customer charges).”
RBI said that it will review all the aspects of digital payment charges as it doesn’t want these to deter digital payments adoption.
- Bring credit cards to UPI: With UPI transactions showing unprecedented growth, it has adversely affected other retail payments, especially card transactions. Since a UPI user can currently only link the savings or current bank account and the debit card to the UPI Virtual Payment Address (VPA), credit cards have not been able to utilise the platform. Now, the RBI wants to bring credit cards on the UPI rail. It said, “feasibility of linkage of credit cards and credit components of banking products to UPI shall be explored.”
What should merchants do
This is the right time for businesses to ride on this bandwagon of digital payments. Every business, whether online or offline, should start accepting digital payments, if they are not already.
Businesses that are already accepting digital payments should ensure they are offering all types of digital payments to their customers. Partnering with a payment gateway that supports all payment modes should be the top priority.
Paytm Payment Gateway enables merchants with 100+ payment sources including debit and credit card, netbanking, UPI, Paytm Wallet, and Paytm Postpaid (buy now, pay later).
Since Paytm Payment Gateway charges 0% MDR on UPI and RuPay transactions, merchants stand to save Rs 97,700 every month on such transactions.
Conclusion
The fact that the RBI has come up with a three year plan on how to holistically grow digital payments, speaks volumes about its bullishness on India’s digital payments landscape.
Switch to Paytm Payment Gateway today and reap the benefits of digital payments.
