The Reserve Bank of India (RBI) today said increased use of technologies such as internet and mobile phones had resulted in innovative, yet complex products and processes. To sustain the business interest of consumers, it was important to create a policy environment that met their expectations of secure payment systems. “The retail payment systems today are dominated by continuous innovations, aided by breakthroughs in technology. This has brought immense benefits, in terms of new products and delivery channels. At the same time, this has engendered concerns for regulators across the globe,” said RBI Deputy Governor H R Khan.
He said the lines of demarcation between products were getting blurred, as multiple access channels and devices were increasingly being used interchangeably. The entry of non-banking entities into the payment space had made it necessary for regulators to continuously monitor their activities, he added.
Pricing related to payment services by non-banking entities was a major concern, as security issues often threatened the confidence of users of retail payment systems, Khan said. He added considering financial inclusion targets, the trade-off between expanding the reach of financial services and the sustainability of the business model was a challenge.
“Though the recent financial crisis did not show any strong evidence of correlation between payment systems and financial stability, payment systems, both large-value and retail, could be a source of instability when financial transactions move largely to the electronic mode, which gives rise to several operational and financial risks,” he said.
As innovations were often technology-driven and developments in retail payment systems had been rapid, the expertise and competence of central bank staff and those engaged in regulation needed to be addressed effectively, Khan added. He said implementation of the new principles for financial market infrastructure (PFMI) would be a big challenge, adding there was a need to assess the relevance of these principles for retail payment systems.
“Possibly, a PFMI-light approach for retail payment systems would be appropriate, keeping in view the need for safe, efficient and robust retail payment systems that would serve the cause of accessible, appropriate and affordable financial services for consumers, particularly those who have remained financially excluded,” he said.
