Understanding Policies and Innovations in the Online Payment Systems in India

To paraphrase former RBI governor Duvvuri Subbarao, the choice of payment and settlement systems is based on three motivations. First, they should be game changing, for example in furthering financial inclusion; second, they must be market and technology based, so that the innovations can be mainstreamed and lastly, they must be stable, a quality exhibited during the 2008 global meltdown.

Jitendra Gupta, Founder and CEO of Citrus Payment Solutions decodes the policy initiatives taken by government of India and the innovations driving the online payment system in India.

eCommerce is booming in India and the current 205 Mn Internet users in the country are spoilt for choice! Online payment system is as important to online retailing—B2B and B2C—as water is to fish. Government policies can unleash the animal spirits of the private sector. While government policies are the catalyst, innovation is the force multiplier which boosts quantum, quality and reach of financial intermediation.

Online fraudsters and thieves have kept the regulator and the industry on their toes. The RBI, which is the industry’s friend, philosopher and guide consistently takes steps to improve safety and security.

For example, it made an online alert for all card transactions mandatory, directed banks and other stakeholders to issue EMV (Europay-MasterCard-VISA) chip card and PIN to customers who have shopped abroad. Asking stakeholders to choose between EVM cards with chip and pin and an Aadhaar based biometric authentication is another such step.

Affordability is an important factor for the RBI when promoting the use of electronic payment products and services. For online transactions, second factor authentication has been mandatory since 2009. Although, sometimes these regulations irk consumers and merchants but results are evident. Online fraud rates are lowest in India as compared to US and Europe.

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Innovations around simplifying payments on mobile would definitely grab attention of investors and merchants. The obvious reason is increasing use of mobile devices for making payments. We are already seeing 15-16% of traffic originating from mobile browsers. In my opinion, this has potential to go up to 50% in next 2 years.

I feel that ‘Digital Wallets’ could be game-changers in coming years. The RBI has given it a leg up by relaxing the KYC norms for a monthly transaction limit of <INR 10,000. One would see a lot of innovations around P2P money transfer and simplified payment experience on mobile devices.The challenge is for non-banking entity to gain consumer’s trust as keepers of money.

About the author: Jitendra Gupta is the CEO/Founder of Citrus Payment Solutions. He leads overall sales and general operations at Citrus. With an experience of 11 years in financial services, he has grown to become an expert in payment industry. He graduated from Sydenham College of Commerce and Economics and qualified to become as Chartered Accountant in 2003.