This article gives an innovative solution for accelerated self-sustained growth, post the great loss created by Covid-19 and also covering up various impediments by losses created by Natural disasters, Cybercrimes, Non-Performing Assets (NPAs), Mismanaged fallouts etc., by deducting 0.01% (i.e. Rs. 1 in Rs.10,000) out of all transactions as Secured Insurance Cess. This creates a large fund planning with miniscule outflow (Secure Cess) to insure loss to citizens, exchequer and others, and provide for much needed fund for national growth and development.
A sound infrastructural foundation is the key to the overall socioeconomic development of India.As per Reserve Bank of India (RBI)’s data of daily transaction, this gives a phenomenal amount which would not only take care of the above, but also fund all development needs of Post Covid19. This would go a long a way in not only getting the economy back on track but also in achieving the dream of US $5 Trillion economy as envisioned. This paper uses materials available in public sources, to build supportive arguments wherever it is found required.
With rapid advancement of technology and advent of new developments, and innovations in the payments ecosystem,the Governmenthas enhanced its focus on safety and security of payment systems. In addition, itcontinued its efforts to nurture efficiency, innovation, competition, customer protection and financial inclusion.Going ahead, the Government’s endeavor would be to promote innovation in the financial sector by leveragingon technology for a sustainable Information and Communication Technology (ICT) infrastructure designed foroperational excellence with focus on resilience, reliability, security, integrity and cost efficiency.
In the recent past, the payments ecosystem in India haswitnessed many developments, resulting in a bouquetof payment systems and platforms, payment productsand services, which are available for consumers forundertaking digital payments, be they individuals, firms,corporates, governments, or other economic agents. This has facilitated creation of an Open Banking Ecosystem and FinTech Startups, Incubators and Accelerators in the Country. In sum, the Reserve Bank of India (RBI) has continuedits efforts to develop the state-of-the-art paymentand settlement systems in the country andenhance the digital payment experience of theconsumers, while ensuring adequate securitymeasures. These initiatives have facilitatedsmooth transition towards a less cash society withimproved transaction efficiency and a delightfuldigital experience. Amidst difficulties arisingfrom the COVID-19 pandemic, efforts were alsomade for smooth functioning of the paymentsystem.
Charging “facilitation fee” for Customer Transaction and Citizen’s Concern
Further, the Reserve Bank focused onenhancements in the ICT infrastructure for internalusers,who are also contributing to improved efficiency.It also helped expand coverage for government transactions using digital technologies.Goingahead, strengthening the payments ecosystem,enhancing awareness, and ensuring facilitation ofdigital payments across the length and breadth ofthe country have been the key areas of focus of theReserve Bank. In the process, charging “facilitation fee” to the tune of 1 per cent of the amount to be transacted by the customers is increasing and is a paramount concern for further penetration of digital payment in Rural India. India’s journey of creating a robust digital financial infrastructure has been characterized by collaboration between the Government, the Regulator, Banks, and FinTechs. This has helped in advancing the country’s goal of enabling financial inclusion and also providing rapid payment digitization for the citizens. The Covid-19 pandemic has further accelerated the adoption of digital payments with many first-time users adopting digital payments and significant uplift by merchants.
The New Normal for Payments
The last few years have witnessed tremendous growth in digital payments in the country. Digital modes like electronic fundtransfer (EFT) have seen greater adoption, along with increased use of payment (credit / debit) cards backed by customer propositions around loyaltyand privilege programmes, exclusivity, etc., and an increase in the merchant base aided by a proliferation of e-Commercesites and apps.Over the years, the successive Governments, and the Reserve Bank of India (RBI) have issued enabling guidelines that have been instrumental in driving the growth of digital payments in India.Key outcomes, due to the efforts of multiple stakeholders, over the years are:
- Moving from cash to a less cash society
- Enhancing customer convenience while making daily transaction
- Making the transaction trail transparent
- Attaining global leadership in digital transaction
The RBI Ombudsman Scheme for Digital Transactions (2019) defines digital transactions as “a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/electronic modes wherein both the originator and the beneficiary use digital/electronic medium to send or receive money.”In fact, one of the objectives of the demonetization exercise in November 2016 was to build a less-cash society and encourage people to use digital platforms.
Aadhaar Enabled Payment System (AePS), BHIM UPI, Credit and Debit Cards, IMPS, Internet Banking, Mobile Banking, National Automated Clearing House (NACH), National Electronic Funds Transfer (NEFT), NETC, Prepaid payment instruments (PPIs), and Real-Time Gross Settlement (RTGS) are some of the popularly used modes of digital transactions in India.
To boost digital transactions and enhance security as well as customer convenience, the RBI has taken numerous stepssuch as the adoption of the National Common Mobility Card (NCMC), licenses to White Label ATM operators, issuance ofEuropay, Rupay, MasterCard and Visa (EMV) and Near Field Communication (NFC) based cards, and customer grievance redressal system.The Government played an active role in popularizing digital payment instruments by organizing Digi-Dhan Melas acrossthe country and incentivizing customers and merchants through the Lucky Grahak Yojana and Digi-Dhan Vyapari Yojanaand cashback offers at fuel stations on payments through digital modes.
The growth and potential of digital payments have allowed numerous FinTech and Payment Companies to flourishin recent years.The Payment companies have leveraged investor funding to diversify their existing product portfolio andbecome full-stack financial service providers, with a lot of them venturing into lending, wealth management andinsuranceaggregator platforms. Customers are now offered a one-stop solution for all their financial needs, and this has significantlyboosted the customer experience.The Open Credit Enablement network (OCEN)& Account Aggregators will change digital lending in India (www.sahamati.org.in) and their architectural designs are depicted in the adjoin diagrams.
There has been a shift in the consumer mindset, during the COVID-19 crisis and the subsequent lockdown, asthey have started using digital modes of payment even in sectors like education.As per the published reports available in open domain, the COVID-19 affected the growth trajectory of payments and reduced economic activity across the nation. Falteringconsumer spending led to a decline in digital payments in the short term. As per the data published by the National Payments Corporation of India (NPCI) in April2020, saw a drop of 20% in the volume of Unified Payment Interface (UPI) transactions. However, the transaction volumes have started recovering andalready reached pre-COVID-19 levels. The increase in UPI transactions was, it was seen, due to increased consumer interestin making bill payments and recharging mobile phones online, and purchase of non-essential goods on e-commerceplatforms.
Future of top payment modes
From cash as the primary mode of payment and usage of debit cards being limited to cash withdrawals at the beginningof the century, the Indian payment landscape has evolved to widespread adoption of multiple payment products andsystems like Prepaid Payment Instruments (PPIs), Immediate Payment Service(IMPS)– Instant Fund Transfer, UPI, National Electronic Toll Collection (NETC), Bharat Bill Payment System (BBPS) and Aadhaar enabled…