RBI to publish paper on bigtech’s payments space

Synopsis

The regulator also said that buy-now-pay-later services have developed into a new payment mode alongside the existing payment modes like cards, UPI, and net banking and it would examine the product going further.

Reuters

The Reserve Bank of India would soon publish a discussion paper attempting to regulate bigtech’s and fintechs in payments space. As part of “Payments Vision 2025” document, the regulator said that factoring in the increasing geo-political risks it would look at bringing in domestic processing of payments. It said it will also support extension of trading hours in both the capital and the money markets to leverage the availability of payments system 24×7.

“BigTechs and FinTechs play an invigorating role in onboarding new users and customising payment experience, given their increasingly dominant role in payments ecosystem, a discussion paper on the need for proportionate regulation by the Reserve Bank encompassing domestic incorporation, reporting, data use, etc., shall be published,” RBI said as part of “Payments Vision 2025”.

The regulator also said that buy-now-pay-later services have developed into a new payment mode alongside the existing payment modes like cards, UPI, and net banking and it would examine the product going further.

“This channel, facilitated by a few payment aggregators, leverages the existing nodal account (escrow account after authorisation) to route payments between BNPL customer and a merchant,” it said. “This novel method shall be examined, and issuance of appropriate guidelines on payments involving BNPL shall be explored.”

The regulator said it will also look at extending trading hours for the money market and capital market, since the RTGS and NEFT payment systems which enable settlements in these markets, operate on a 24×7 basis.

“With a view to leverage the availability of payment systems on 24x7x365 basis, extension of trading hours of these markets to enable longer market availability for trading and settlement shall be facilitated, in conjunction with the concerned market departments of the Reserve Bank,” it said. “This shall enhance efficiency and further price discovery in these markets.”

The regulator which has put in place guidelines for domestic storage of payments data, still allows banks and non-bank payment system operators to process payment transactions abroad subject to certain conditions. As part of its vision document 2025, the regulator said that it would explore possibilities of clearing all transactions domestically.

“Keeping in view the emerging geo-political risks, options shall be explored to ring-fence domestic payment systems, including the need to mandate domestic processing of payment transactions,” it said.

As part of its 2025 vision the regulator said it’s also reviewing all aspects related to charges involved in various channels of digital payments. The RBI is also exploring a framework whereby all digital transactions are also processed through a payment system.

“All merchant payment transactions done using internet, mobile banking are presently processed through payment gateways / payment aggregators,” it said. “As this practice entails delays in merchant settlements, a framework shall be introduced such that all these transactions are also processed through a payment system.”

The regulator is also exploring introduction of additional factor authentication for international transactions done using cards in order to increase safety.

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