RBI launching a new payment system called the Unified Payments Interface (UPI), which will allow people to send and receive money across banks just through a single identification without sharing financial information.


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  • RBI's Bharat Bill Payment System (BBPS) will be another revolution in the way of paying the bills. It may start from July'16
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  • RBI's Bharat Bill Payment System (BBPS)
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  • Mobile Payment
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  • Banking Technology Gets a Rajan Reboot
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  • Itz Cash Gets RBI Nod for Bharat Bill Payments
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  • Banks' New Mantra: Dump Plastic Cards, Go Virtual


    TECH-SAVVY Banks, wallet cos are issuing virtual cards that allow customers to make payments from their smartphones

    As physical wallets are going the digital way, can plastic credit and debit cards be far behind? Banks and wallet companies are issuing virtual cards for users to make payments from their smartphones instead of carrying a piece of plastic around.The country's largest lender ICICI Bank was the first to launch contactless payments and is expected to benefit over 30 million credit and debit card users. Other leading private sector lenders such as HDFC Bank and Axis Bank are set to launch virtual cards for both debit and credit card customers that will sit inside your mobile phone.

    “Axis Bank app will allow you to create virtual tokens on your NFCenabled phone with one card that is sitting inside your phone,“ Sangram Singh, head-cards & merchant acquiring, Axis Bank, told ET. “This is an emulation of your plastic card on to your phone.“

    With the application of host card emulation technology (HCE), a bank can create a virtual card which will sit in the users' mobile phone. Instead of carrying the plastic card, the user can authenticate the transaction through his mobile phone which needs to have near field communication (NFC) abilities.

    HDFC Bank, the largest issuer of cards, is also expected to launch its virtual card soon. The bank said that use of new technology will help to increase its card base. “We are right now testing out with three different merchants,“ a se three different merchants,“ a senior HDFC Bank official said. “As a leader unless we use new technology, it will be difficult for us to expand the market and grow.“ While banks are trying innova tive mechanisms to promote digital payments, even wallet companies have started offering virtual prepaid cards for simple payments.Wallet companies such as Zeta and Udio have tied up with RBL Bank and payment gateways like Visa and MasterCard to create virtual cards that are programmed inside the mobile phone.

    The virtual co-branded card comes with a unique 16-digit number and sits on the wallet application. Whenever the customer needs to make a payment, he can do so through his virtual card by entering card details and CVV , which works exactly like a debit, or credit card.

    While the technology of virtual cards is available with payment gateways, the problem in India is with the dismal card acceptance infrastructure. India has less than 13 lakh PoS terminals for more than 60 crore debit and credit cards.Even the PoS terminals that are present are mostly outdated. Further, there are only a handful of smartphones that are enabled with the NFC technology. “Tomorrow if all the terminals in the country are NFC-enabled, then I may not need a plastic card at that point of time,“ said Singh. “For some time, multiple things will co-exist.“

    Similarly, even the wallet companies believe that going plastic-less is still some time away, but then technology is taking the system that way only.

    “We are still providing the users with a plastic card,“ Bhavin Turakhia, co-founder, Zeta, told ET.






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  • NPCI to Audit Fin Inclusion Tech for Jan Dhan Accounts


    80% of interbank transactions failed for ac opened under the government's scheme

    National Payments Corporation of India (NPCI) will audit the financial inclusion (FI) technology platform of all banks after it was discovered that 80% of interbank transactions failed for accounts opened under the government's Jan Dhan scheme.“During a review it came to notice that the FI switch of some banks was not working, leading to such a high failure rate,“ said a NPCI official, who did not wish to be named.

    The government has also asked NPCI to look into the issue as it looks to push various social sector schemes through the Jan Dhan, the government's flagship scheme for financial inclusion rolled out across India to take banking facilities to the poorest.

    “We are in discussion with banks to work out the issues. Also an audit is being done to ascertain which banks are lagging,“ said the NPCI official quoted above, adding that in some cases, including that of country's largest bank State Bank of India, the failure rate has been brought down considerably.

    “The aim is to bring this failure rate to as low as 20%,“ he said.

    Finance Minister Arun Jaitley had earlier said that the next phase of the financial inclusion scheme will be focused on mobilisation of financial savings to reverse the decline in the savings rate.
    According to latest government data, there are 1.25 lakh bank mitras, operating 1.05 lakh hand-held machines. In a week, at least 54,000 machines are active, which means they make at least one transaction.

    Most of these transactions either happen on the Aadhaar Enable Payment System (AEPS) or Rupay Card. AEPS is a bank-led model which allows online interoperable financial inclusion transaction at any point of sale, through the business correspondent of any bank using the Aadhaar authentication.
    “The whole idea is that a customer should be able to transact irrespective of which bank device the bank mitra operates on. Since this was not happening, we have decided to do an audit,“ the above quoted NPCI official said.

    Another official said that loading of other social security schemes including direct benefit of transfer will only work if the inter-operability issue is resolved.

    “You have to provide customers cash-in and cash-out points. This will also provide more business to bank mitras and make them viable,“ he said. “Banks will be asked to ensure that their systems are able to deal with high volume and low ticket size payments and the performance matches with real time payment channels like ATMs.“

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  • UPI to Go Live this Month with 15 Banks


    RBI's brainchild, Unified Payments Interface (UPI), launched in April this year, will finally go live by the end of this month with all the 15 participating banks.UPI allows users to send any amount of money below `1lakh instantly without having to add beneficiary as in the case of IMPS. It can be used for settling bills among friends, making payments to merchants in the offline world, and as a replacement for cash on delivery as well. UPI will be based in an app on the smartphone and the user can use any of the banks' UPI apps for payments from any of his bank accounts.

    National Payments Corporation of India (NPCI), the umbrella organisation for all retail payments system in India that developed the backend technology for all transactions on UPI, said it is in the final stages of testing the integration with banks and rectifying operational errors. It has even finali sed the fees that need to be paid to NPCI and the beneficiary bank.

    “We will be going live on all the 15 bank apps within the end of this month. The banks have already developed the applications and we are in the final stages of testing,“ said Dilip Asbe, chief operating officer, NPCI.“For peer-to-peer payments, we have fixed `1 for transactions up to `25,000 and `5 for transactions between `25,000 and `2,00,000.“

    While these are the rates to be paid by the remitter banks, users will not have to pay anything extra. In case of merchant transactions it has been fixed at 0.4% up to 2,000 and 0.65% beyond that. Asbe, however, added that after the app goes live and the banks get a few merchants on board who start using it for payments, it will take another 3-6 months to iron out the operational glitches till it attains a stage of smooth functioning.

    Unified Payments Interface was officially launched by the RBI Governor Raghuram Rajan on April 11. While the backend technology was ready and a few merchants were on board, banks were still in the process of developing their UPI apps.

    Now with the banks also ready and the integration with NPCI being in its final stages, the apps would be available for download in the Android app store.

    “Once the app goes live, banks will need to integrate their systems with the leading ecommerce firms and thereby channel payments through the UPI app. Our main target is also peer-to-peer payments other than consumer spending,“ said Asbe.

    Even banks have started their process of integrating with various genres of merchants, who would accept payments via UPI. “Currently, we are integrating with about 10 merchants. More merchants are expected to be on-boarded in the next couple of weeks. We will release the names once the app goes live,“ said Ritesh Pai, country head, Digital Banking, Yes Bank.

    However, only people with debit cards can use UPI as NPCI is keeping the 16-digit card number and its expiry date as the second factor of authentication. “The first factor is the mobile number, which will get verified through the One-Time Password, but for second factor we chose the debit card because it has the highest reach in the country,“ said Asbe.

    NPCI is also experimenting further with QR code based payments so merchants would not need to invest in bulky POS terminals to accept digital payments from customers.

    However, in the initial stages, the payments will be done through a virtual payment address. “Even if four banks come up with excellent UPI apps that would be enough for UPI to scale up, unlike mobile banking, a customer will not need numerous applications to access his different bank accounts,“ explained Asbe.
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  • NPCI Plans Negative Database to Check Wallet-based Frauds


    Once NPCI gets RBI nod, it can set up back-end infra to detect fraud

    The National Payments Corporation of India (NPCI) may build a risk-based negative database on wallet-based frauds, which will help wallet companies detect fraudulent transactions early and stop them from going through.Several wallet companies have been facing issues around money that is siphoned off from bank accounts by fraudulent means and loaded into mobile wallets. The money then gets credited into the fraudster's bank account, thereby causing a break in the digital trail. This makes it difficult for law enforcers to track the money .

    “We have been approached by the wallet companies for developing this risk-based negative database, but it is still in the early stages of discussions. We are yet to approach the regulator and decide on the modalities,“ said Dilip Asbe, chief operating officer at NPCI.

    NPCI, which is the umbrella organisation for payments in the country, needs to approach RBI for regulatory clearance.Once it receives the go-ahead from RBI, it can develop the back-end infrastructure, which will red flag fraudulent walletbased transactions.

    Once a wallet company receives a complaint or finds a transaction suspicious, it may alert the database with pointers like the bank account used or the location from which it was initiated.If these details are present with NPCI, then it can alert other wallets, block the bank account concerned and stop further transactions from similar points.

    “We are trying to build a risk alert database, working with NPCI, as they have the technology to be able to help us as an industry body ,“ said Gaurav Chopra, executive director at Payments Council of India (PCI). “Since PCI is a self-regulatory body and is a common platform for all payments and wallet companies, we are trying to do this at an industry level.“

    Industry insiders say while banks can do more to create customer awareness, wallet companies are also to be blamed. “They are not putting in strict checks and measures, because it helps them inflate the number of mobile wallets created and since the individual amounts are usually less, even customers do not report the matter to the authorities concerned,“ one of these people said, requesting anonymity.

    “Though the wallet-based frauds are still in their early stages, we, as an association, took this step to approach NPCI for a solution. Since this industry is still growing, such steps would only help boost customer confidence regarding the safety of wallets,“ said Chopra.


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  • Swipe your card to pay for vada pav


    Falling Merchant Fees Boost Plastic Money
    Credit cards like American Express have typically been a status symbol associated with high-end stores and luxury goods. All that is changing. Today , it is not just high street welcoming cards but even paanwallas in Bhopal and sugarcane juice vendors in Mumbai who are saying yes to credit cards.Cards being accepted only for transactions above Rs 300 are no longer a barrier. According to Manoj Adlakha, CEO, American Express India, the focus is to be wherever customers spend. “

    American Express continues to be a premium and an aspirational brand. At the same time, we are also focusing on being a more inclusive and welcoming brand, and hence be present where our card members want us to be,“ he said.

    Enabling wider card acceptance are companies like Mswipe which use homegrown technology to make credit card acceptance more affordable. According to Manish Patel, founder and CEO, Mswipe's mobile point of sale (PoS) terminals are around 40% of the cost of traditional credit card swipe machines offered by banks. Mswipe has signed up with Corporation Bank to facilitate electronic payments to whichever bank account the merchant wants. The low-cost strategy has helped Mswipe deploy around 87,000 terminals. This makes it the fifth largest PoS deployer in India and the largest among nationalized banks.

    According to Patel, it is a myth that small merchants are resisting electronic pay ments. “Ground reality is a typical small merchant needs change to operate his business if he wants to accept cash payments. Cost to procure change today is around 4-5%. Temples and beggars are the main source. By contrast, card transaction fees are much lower,“ said Patel.He points out that today for debit card transactions, which form bulk of electronic payments, the merchant charges for low-value payments are less than half of credit cards at 0.75%.

    Adlakha said that customers are increasingly using cards for low-value transactions such as movie and railway tickets and fast food joints as well. “Availability of various viable platforms and favourable government regulations have surely encouraged digital payments in India,“ he said. To widen credit card acceptance, Amex has tied up with ICICI Bank and State Bank of India which makes the most premium card available in the store around the corner.




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  • Digital Payments Industry will Grow to $500 b by 2020


    The Indian digital payments industry will grow to $500 billion by 2020, and contribute to 15% of GDP , a report by Google and the Boston Consulting Group said. More than 50% of India's internet users will use digital payments by 2020 and the cash will lose its supremacy in the Indian payments system by 2023.“The smartphone explosion will usher in a new era in digital payments in India over the next few years that will see digital payments exceed $500 billion by 2020 and non-cash transactions exceed cash transactions by 2023,“ said Alpesh Shah, senior partner at The Boston Consulting Group, India.

    As digital payments -through wallets and the unified payments interface -grow, digital means of payments will take precedence even over traditional non-cash methods like cards. “In five years, we are convinced India will have the most advanced digital payments system in the world. I think India could leapfrog traditional payments,“ said Rajan Anandan, VP, SEA & India, Google .




    `E-payments to be 15% of GDP by '20'


    Fuelled by rise in smartphone penetration and adoption of mobile wallets by small offline merchants, the Indian digital payments market is set to grow by 10 times in the next four years to be $500 billion or 15% of the country's GDP , says a report jointly by Google and the Boston Consulting Group.By 2020, the country's internet user base will reach 500 million, and half of them will make digital transactions, the report said. India's digital payments revolution is being led by mobile wallets enabling micro-payments in a country where bank accounts are still a big deal. The Google-BCG report said that over 50% of person-to-merchant transactions was expected to be under Rs 100. Over 60% of digital payments value is expected to be contributed by offline points of sale such as unorganized retail, eateries and transport.

    Rajan Anandan, MD of Google India and South East Asia, said, “Supported by progressive regulatory policy , the digital payments industry is at an inflection point and the top 100 million users will drive 70% of the gross merchandise value.“





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  • No more queues, quick bill pay for BHARAT IS HERE


    A centralised bill payment system for those unconnected to netbanking will soon be reality

    Soon, Janeshwar, a mi grant labourer in Ker ala, will not have to plead his family members in UP to trudge several miles to make payment for utility services. Janeshwar will be able to walk into a kirana store, a bank branch or a unit of a digital wallet company in Kerala, where his work has taken him, and make the utility bill payment for his house in UP . This will be possible once the Bharat Bill Payment System (BBPS), a framework created by the RBI, becomes operational. The common outlet to pay utility services bills is mainly aimed at those for whom netbanking is not a way of life.What is co-mmon between Jan-Dhan, a financial inclusion programme, and BBPS is that it makes access to bill payments universal. BBPS is a centralised bill payment system which gathers details of bills issued by utility services such as electricity, water, gas, telephone, DTH and insurance companies and facilitates payment instantly across India.Any bank or a payment company that plugs into BBPS can allow its customers to view and pay bills. The system comprises a digital platform called Bharat Bill Payment Central Unit (BBPCU) operated by the National Payments Corporation of India and a network of existing players called Bharat Bill Payment Operating Units (BBPOUs). BBPCU will plug in all billers into a central server. The operating units (BBPOUs) will comprise two sets of players -banks and wallet companies like Paytm, Oxigen, Mobikwik and Itz Cash on one hand and aggregators like BillDesk, TechProcess, Citrus Pay and Euronet on the other.

    For making payments through BBPS, customers will have to get registered either online or through a BBPOU, which will be set up in a few weeks. Once they have a BB POU customer ID, they can access their bills through any of the operating units, view the bill and make payments through multiple modes such as netbanking, creditdebt cards, e-wallets and cash in case of offline mode, and get instant confirmation. A bank can provide an interface through an ATM as well.

    How will BBPS change payment dynamics? “BBPS will open up avenues for service providers by giving them thousands of collection centres from Day One,“ said Anand Ramachandran, chief financial officer at TechProcess, which owns the payment gateway Billjunction.And apart from utilities and insurance companies, he expects the system to facilitate payments for educational institutions as well. Once BBPS becomes operational, companies can free up hundreds of collection centers and bring down bill collection costs.Alternatively , some of them can farm out their collection centers to become a BBPOU and collect bills for all providers, Ramachandran adds.

    Also, BBPS will level the playing field for payment companies, said Amrish Rau, CEO, Citrus Pay , which has applied for an operating unit licence. Since billers will have the same reach irrespective of the aggregator they choose, they are likely to go with the player delivering the best value, said Rau. At present, payment companies like BillDesk (valued at over $1 billion) dominate the aggregation business.

    Most of the payment companies are keen to tie up with BillDesk because of the sheer number of utilities -like mobile & fixed-line telephony -and insurance companies that it brings in. This also encourages utilities to turn to BillDesk.

    Naveen Surya, MD of Itz Cash, which recorded Rs 6,000 crore worth trans actions in the utility bill payments space, expects volumes to more than dou ble at Rs 15,000 crore in FY17 once BBPS becomes functional. The operationaliza tion of BBPS is likely to trigger a bidding war for existing companies and would lead to expansion in the market for bill payments. For instance, TechProcess, in anticipation of BBPS, plans to tie up with 2,000 educational institutes involving fee payments of around Rs 500 crore.

    For much of India's middle class with access to internet banking, bill payment is not a challenge. This is because of bilateral agreements between payment banks and aggregators, which bring in billers, a bit like earlier ATM networks. In the past, there was an ATM-sharing arrangement among PSU banks through bilateral pacts. But with the RBI creating the National Financial Switch (NFS), all banks and ATMs got connected. Similarly, banks will now have to merely plug into BBPS where all billers will be present.

    A key driver of growth for the e-wallet companies has been the recharge business. Companies have built their fortunes on the back of recharging prepaid mobile phones and direct-to-home television channels -estimated to be over Rs 2 lakh crore annually . The next big opportunity for the payment industry is thrice as large -over Rs 6 lakh crore. According to a report by Axis Bank, at present 25% of bill payment transactions are done using electronic channels and ECS (Electronic Clearing Service). By 2020, 50% of all bill payment transactions will be made using electronic channels.


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  • Payment Banks may Pay a Heavy Price for KYC Norms


    Firms fear paper-based ID verification will be a cost-intensive and time-consuming exercise

    Just a few months before the new crop of payment banks start their operations, their chiefs are a worried lot. The banking regulator's ask in terms of meeting the Know Your Customer (KYC) norms has put them at par with traditional banks, and firms are concerned that the preference for “paper-based“ KYC will be a cost-intensive and time-consuming exercise -and therefore a major impediment to the growth of the new age banks.Paytm payment bank's CEO Shinjini Kumar told ETthat the industry is very “aggrieved“ with the Reserve Bank of India (RBI) asking all entities to adhere to the centralised KYC system instead of just relying on the Aadhaar-based eKYC for payment banks. “We are grappling with that problem right now and we are talking to different people. We are hoping that there will be some understanding. Anyway our accounts are capped at `. 1,00,000. There should be no reason why eKYC should not be the only way to do KYC. It's also digital and more authentic.“ Chiefs of Aditya Birla Idea Payments Bank, Sudhakar Ramasubramanian and Vodafone M-pesa payments bank Suresh Sethi also aired similar concerns to ET. They argue that payment banks don't have the same manpower to collect paper-based KYC like traditional banks and given that they are capped at a balan . 1,00,000, they don't share the same ce ` amount of risk.

    While RBI had earlier accepted eKYC as a means for customer aut hentication at the time of opening accounts, the new norms mandate a common KYC across all financial services entities for which detailed KYC is required to be collected and uploaded as a paper form to a central KYC repository -Central Registry of Securitisation Asset Reconstruction and Security Interest of India, or CERSAI. The idea is to streamline the KYC process and avoid duplication of KYC for customers at multiple agencies.

    But, for payment banks to be cast under the same net, it means that instead of just relying on the biometric based eKYC they will have to collect more details of their customers and upload them to the central registry .

    Sudhakar who is the CEO (designate), of Aditya Birla Idea Payments Bank said that in the case of payment banks a phased approach towards KYC will be better received since the whole idea behind the payment banks is towards financial inclusion.

    “If we have too many restrictions for someone who keeps ` . 5,000 in the account, it could prevent many of the unbanked from experiencing the benefits of financial services. KYC norms can be applied in a layered manner as the customer's balance and transactions increase,“ he said.Digital KYC will help ease the “entry barrier“ for such people along with being a more authentic means of KYC than a physical KYC.

    “Currently , over 90% of all retail transactions are through cash in the country , if these transactions have to be converted into the electronic format, banking will have to be relived from some of these troubles,“ he added.




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