The Reserve Bank of India's (RBI's) latest move to set up pan-India new umbrella entity (NUE) for retail payments is putting a lot of pressure on the National Payments Corporation of India (NPCI), Dilip Asbe, Managing Director and Chief Executive Officer of the government-owned sole umbrella body of retail payments in India, said on March 9.
Asbe, however, added that he totally subscribed to the central bank's views that more innovation is required in the digital payments space.
"With this whole NUE conversation, there is a lot of pressure on the NPCI to kind of continue the innovation journey, and I fully agree (with RBI) that we need more innovation in the payments system, options for the customers, more power to the customers while doing the digital payments," Asbe said while speaking at a virtual event organised by digital payments firm Paytm.
"This story actually puts a lot of pressure on NPCI management team and the thousand employees of the NPCI. We believe we need to do a lot more. The game has just started," he added.
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Currently, the NPCI is the single umbrella body to facilitate retail payments in India. It owns and operates the UPI Interface, the RuPay network and other payment and settlement functions. But, the government and the RBI feel that the NPCI alone won’t be able to carry out the big shift to digital considering the volume of transactions and the number of new entrants.
It has therefore introduced NUEs which will effectively offer competition to the NPCI.
Just like the NPCI runs UPI, IMPS and other payment modes, the NUEs will create similar mechanisms which will then be used by banks and fintech companies.
Last month, the RBI extended the deadline for making applications for authorisation of NUE till March 31. The central bank had invited applications for this on August 18 and gave time for six months to apply. The reason cited for the deadline extension was COVID-related disruptions and inconveniences.
But the move comes after reports of multiple organisations looking to apply for the licence. Amazon, along with ICICI Bank, Axis Bank and Visa are expected to present a proposal to the RBI to set up an NUE.
Paytm, Ola and IndusInd Bank are also reported to be joining the race for the NUE licence.
After the 2016 demonetisation exercise, there has been a major shift in the way digital payments were perceived in India. Between 2015-16 and 2019-20, digital payments have grown at a compounded annual growth rate of 55.1 per cent – from 593.61 crore in the year to March 2016 to 3,434.56 crore in the year to March 2020.
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