Union Budget Impact on Digital Payments in India 2017.
What Budget 2017 did not have for digital payments
While Budget 2017 seems to have given unprecedented focus to digital payments and infrastructure for adoption of new payment forms, several issues for the digital payments industry have not been answered.
Despite the Economic Survey on Tuesday emphasising that costs of incentivising digital payments should be borne by government and RBI and not customers or financial intermediaries, payment companies felt the issue was not addressed even after a heated debate on issues of lowering merchant discount rate (MDR) in recent months.
Lowering MDR as a means to push merchant adoption impacts revenues for banks as well as credit card and payment gateway companies.
Issues of interoperability and open access to payment systems by non-bank payment service providers, which were heavily emphasized by the Ratan Watal committee report, were also not clearly addressed. The only link to these issues seems to come from the government’s decision to review a and amend the Payment and Settlement Systems Act, 2007. The Watal committee has called for updating the Act on competition, open access and interoperability including data security and consumer protection.
“Creating a Payment Regulatory Board (PRB) within RBI is a great start. We believe an additional direction towards bringing parity between physical cash and digital payment transactions, ‘interoperability’ and access to a unified payment infrastructure, with absorption of merchant discount rates by the government, allowing non-bank PSPs to directly access payments systems of (RTGS & NEFT) would also follow soon,” said Naveen Surya, chairman of Payments Council of India who was on the Watal committee.
One of the issues also raised was on the role of the NPCI and the government in promoting digital payments.
“There should be clarity on what role the NPCI and the government play in the ecosystem, whether they looking to create solution such as the BHIM app or they looking to to promote the whole payments ecosystem,” said Bipin Singh, cofounder of mobile wallet company MobiKwik.
Bala Parthasarathy, former managing partner of VC firm Prime Venture Partners and founder of lending app Money Tap, also questioned the focus only on the BHIM app.
“Giving cash-back and referrals for use of UPI is good – but the budget says it’s for “BHIM” app. Hope it gets expanded to all UPI apps,” he said.
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