Recently, the Reserve Bank of India (RBI) has concluded the new framework for authorising a new umbrella entity (NUE) for retail payments. A draft framework was released earlier, in February, this year.
The framework proposes that companies with a net worth of Rs.300 crore with an experience of a minimum of three years in the payment space can apply to join the family of entities for various payment services.
Currently, there is only one not-for-profit entity, the National Payments Council of India (NPCI), bringing various payment systems together to perform inter-bank transfers, such as RuPay, UPI, and National Automated Clearing House. With this move, RBI is planning to build a parallel network to NPCI that can maintain interoperability with UPI and other services, as well as nurture the system with innovation and inclusion in the payments space.
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From the customer perspective, the development of induces competition in the monopolised space. Also, it will give more scope to expand the capabilities of such services leading to onboarding of more users. It is expected that 500-600 million consumers will be using digital payments in India post the licensing event of these umbrella entities. That is about 50-55% of the retail costs may become digital. Digitising payments to this extent would place India, among other developed economies across the world.
Opening the opportunity for a parallel payments system at a time when it is necessary and safe to go digital has attracted private participants. The initiative can also be seen as an objective of NPCI to transform India into a less-cash economy, if not a completely cashless economy, with the support of digital payment services due to COVID-19.
RBI’s approval for such a proposal has the potential to drive several new services similar to UPI entering the market and exploit every available opportunity in the digital payments space. As per NPCI, a single portal would be built to access various payment services to keep it easy and convenient for end-customers to operate.
