In order to minimize the concentration risk in retail payment systems, from a financial stability perspective and to foster innovation and competition and to encourage more players to participate in and promote pan-India payment platforms, Reserve Bank of India (RBI) has come up with a policy paper on authorizing new payment systems / payment systems operators.
The paper provides an overview of existing retail payment services and retail payment operator landscape, various retail payments systems and the concentration of payment systems at National Payments Corporation of India. It also discusses the advantages and disadvantages of concentration, pros and challenges in encouraging competition, on-tap licensing of payment systems, reviewing capital requirements and alignment of regulatory framework to allow banks and non-banks to offer payments systems based on their capabilities and potential, risk assessment, etc.
The policy for authorising payments systems have impact for all stakeholders like banks, fintechs, clearing houses, payment system operators, consumers. Some of the topics of discussion would include
- Viability and competition concerns
- Bank / Non Bank level playing field
- Interoperability in multi payment system operator market
- Systemic Risk, Oversight, Governance and Regulatory capacity
- On-Tap Licensing with entry, exit criteria.
- Reorganizing existing market for competition - Function based split vs Payment System based split.
- Data debate -- What does opening up mean in the context of data protection, payments data localisation, data centralization and privacy
- Role of state in opening up / market expansion of payments market.
Here’s a reading list for you to consider reading before attending the discussion
- Policy Paper by RBI, 2019
- DIGITAL PAYMENTS - Level the Playing Field to Leverage the Potential - Competing with cash in retail payments by CUTS International, 2018
- Ratan Watal Commitee Report for context, 2016
- Payment System Oversight and Interoperability, ITU-T Focus Group Digital Financial Services, 2016
- Competition and collaboration in UK payment system - London Economics, 2014