RBI’s Payments Vision 2025: Increase Digital Transactions By 3X, Regulate Big Tech Players

The Reserve Bank of India (RBI) on Friday (June 17) released its ‘Payments Vision 2025’ that aims to strengthen the e-payments ecosystem in the country.

Based on the core theme of ‘E-Payments for Everyone, Everywhere, Everytime (4 Es)’, the document envisages to provide users with safe, secure, fast, convenient, accessible, and affordable e-payment options. 

The vision document was prepared after consultation with key stakeholders and has five key themes – integrity, inclusion, innovation, institutionalisation and internationalisation (5Is). The document covers 47 specific initiatives and 10 expected outcomes that it aims to achieve over the next few years. 

The central bank aims to increase the number of digital payment transactions by more than 3X by 2025 and to curb the volume of cheque-based payments to less than 0.25% of the total retail payments. The document also envisages an annualised growth of 50% for UPI payments and 20% for Immediate Payment Service (IMPS) and National Electronic Funds Transfer (NEFT). 

In a further push for digital payments, the RBI will work towards reduction of cash in circulation as a percentage of gross domestic product (GDP). It will also target increasing the number of registered users for mobile-based transactions at a compounded annual growth rate (CAGR) of 50% by 2025.

The document also outlines the central bank’s aim of increasing point of sale (PoS) debit card transactions by 20% and to increase card acceptance infrastructure across the country to 250 Lakh touchpoints. All these initiatives are part of the document along with RBI’s initiative to ensure that debit card usage surpasses credit card usage in terms of value by 2025.

Big Push For E-Payments

The RBI will undertake 47 initiatives to streamline the e-payments infrastructure in the country as it prepares for the next evolution of the space. These include weaving in of alternative authentication mechanisms, apart from OTPs, such as biometrics and and digital tokens to authenticate users. 

The central bank will also take initiatives to promote the usage of legal entity identifiers (LEIs) to promote cross-border payments and screen sanctioned entities. LEI is an alpha-numeric code that is used to uniquely identify parties involved in a financial transaction and faster tracking of payments.

As part of the initiative, the RBI aims to enhance the scalability of payments systems. In the document, RBI said that it plans to review and increase the batches in which NEFTs are operated.

As part of the vision, the central bank will explore options to mandate domestic processing of payments transactions. The decision was taken in view of the emerging geopolitical risks. The RBI also said that it will undertake a study on the feasibility of digital payments protection fund (DPPF) that will provide a security cover to defrauded customers and issuers of payment instruments.

The RBI will also enable a framework for geo-tagging of payment system touch points across the country. As part of this, it has already begun the collection of data related to coordinates of the payment infrastructure across the country. The move has been designed to measure the extent of digital payment penetration across the country.

RBI also appears to have turned its sights on big tech players and their ‘increasingly dominant role.’ In the vision document, RBI said that it will publish a discussion paper on the need for ‘proportionate regulation’ against big tech and fintech players. This paper will encompass issues such as domestic incorporation, data use, among others. 

Authorities will also undertake evaluation of charges for all payment systems. “A comprehensive review of all aspects related to charges involved in various channels of digital payments shall be undertaken,” noted the document.

Use Of Technology

The Vision 2025 document also includes a provision that calls for developing a framework for an internet of things (IoT)-based payments systems that would enable customers to pay via connected devices apart from users’ phones and tablets. The RBI also intends to create a new system for processing payments done via internet and mobile banking services. Currently, these services are routed through payment gateways and other aggregators. 

The RBI will also undertake a comprehensive review of the payment and settlement systems (PSS) Act. The central bank will also constitute a payments advisory council (PAC) to assist the board for regulation and supervision of payment and settlement systems (BPSS). The PAC will comprise representatives from startups, consumer groups, digital payments companies, among others.

The feasibility of expanding RTGS to settle transactions in major trade currencies such as dollar, pound, and euro, too would be explored through bilateral or multilateral arrangements, the document noted.

The RBI also said that it is working towards the introduction of  a central bank digital currency (CBDC) in the country. It further added that ‘various use cases would be explored to bring in further efficiencies in domestic and cross-border payment processing and settlement using CBDCs’.

According to latest data, UPI recorded more than 595 Cr transactions worth INR 10.4 Lakh Cr in May this year.