A P Hota, MD & CEO, National Payments Corporation of India (NPCI), wants his organisation to help enable every Indian to start making digital transactions in every sphere of life, reducing dependency on cash.
What is the relevance of NPCI to infrastructure?
NPCI falls into the category of financial market infrastructure. Our infrastructure is not visible to the naked eye. The financial market infrastructure, however, is huge. Within this, NPCI plays the role of a payments utility. We are like a utility to the banks wherein we facilitate over 25 million payments transactions daily.
Surely, such volumes require a robust data connectivity network?
Yes, the most important challenge is the telecommunication and data networks that we face in our work to connect banks and to connect people. While all the major banks are already connected, there are Regional Rural Banks and district central co-operative banks in the remote areas that cannot connect. There is an attempt to make mobile banking available and pervasive. However, only the short-message service (SMS) and call services are available throughout the country, not the data grid services. This is where the government´s optic fibre network, whenever it gets rolled out, will be useful.
Only then, financial services will be able to ride on that network.
Moreover, in financial services, we need 24x7 power. This is why companies are shifting their data centres to Hyderabad, Bengaluru or Chennai because, possibly the availability of power there is much better. For instance, beyond Vashi in Navi Mumbai, uninterrupted power may not be available. This is why nobody wants to put up their data centres close to Mumbai, because if they do that, their data centres will have to run on diesel generators and that will be much more expensive. Chennai, Bengaluru and Hyderabad are becoming preferable destinations in comparison.
Even where you do have connectivity, India ranks pretty low on speed and quality of connection...
This is true. Even at metro centres, we face challenges. Even when we need to provide a demo on mobile banking, we have to be very careful to see that the mobile network is really working properly! Since connectivity is a problem, we may have to go to certain corners of the office where the signals are stronger to get the link. Nonetheless, it is improving and there hasn´t been a serious issue that has affected any transaction in the real world.
However, if we want to integrate the whole country with a digital payment system, the optic fibre network is something we will have to look at for this purpose. Certainly, we have been placing a thrust on mobile banking, and network connectivity is crucial from this angle.
How are you dealing with this?
The challenge is with respect to the data network. There are quite a few dark spots in the country where there is zero connectivity. We have come out with a solution. We have started using the Unstructured Supplementary Service Data (USSD) based financial transaction wherein you can perform financial and non-financial transactions just by dialling *99# from any mobile. The system is such that wherever the voice grid link is available, USSD also works. This channel is not a data channel but almost like a voice grid channel on which messages can travel. It is possible, at least for the GSM (Global System for Mobile Communications) phones. USSD is a capability built into the GSM standard. This is already in operation.
Are you involved in the e-tolling project for setting up the clearing house?
The National Highways Authority of India (NHAI) has given us the responsibility to build the clearing house for e-tolling. In this system, we are envisaging a barrier-free tolling system. The back-end, toll payment transactions will happen through our system.
Sometime back too, this had been envisaged. What happened?
ICICI Bank and Axis Bank have made it operational in about 160 toll booths and issued around 300,000 cards but they are not interoperable. Now, however, there is a plan to make it interoperable. In this new system, all banks will be able to issue cards. When this happens, there will be interbank transactions which would have to be settled through a clearing house. We have started the work of building the clearing house. We are awaiting the Reserve Bank´s approval as this is a payment system with multiple banks. We expect the time-line to be around July or August this year. Initially, around 300 toll booths would start off. It is already there in 160 booths by ICICI as mentioned earlier but they will have to slightly revamp their process to align with the new system. The toll booths have already been told to ready themselves. This can then be taken forward on the state highways in due course. Initially, NHAI has mandated electronic toll collection (ETC) gates on only one lane on each side of the toll booths. Gradually, they will increase this when the cards are issued in bigger numbers. It is expected that in two-three years from now, most of the lanes will be ETC lanes. The cards will be sold mostly through toll booths and petrol pumps.
Do the cards issued by banks need to be displayed or will it be done via the licence plates?
It will be an RFID card, and not with the licence plate.
In the future, will we have to display these cards as a norm?
Yes, because one could probably tamper with number plates leading to problems in reconciliation. Moreover, all new cars released into the market also carry a chip with certain functionalities that can be leveraged.
What are the new products that you are bringing to market?
Quite a few. One of them is the Unified Payments Interface (UPI) which is an improvement over the current real-time money transfer IMPS. Sending money in real-time 24x7 via any channel was already there. Now, we have improved it by making it real-time collect. Earlier, it was only real-time sending.
Also, earlier, for sending money, you needed the bank account number and other details. Now, money transfer can happen only with an email-like financial address. Suppose I want to send money to you and you have already registered with UPI, you may generate a virtual ID as your financial address, say - rouhan@xyzbank - and I can send money to this address. XYZ Bank will translate this to make the deposit in the appropriate account. So, the financial address is email-like.
The second product that we expect to introduce probably by the end of June is the Bharat Bill Payments System (BBPS). This will be a national level bill payments infrastructure, whereby a customer/consumer can make any type of bill payment at the physical/virtual outlet of any authorised bill payment operator.
The third product is the e-tolling that I have already talked about.
The fourth product is tap-and-go payment. We are trying this out in Bengaluru with the public bus commute system. People can just tap the card on a terminal and walk into the bus and tap it again before dismounting. These systems were tried earlier in different cities but they were not scalable. Now, there is a national specification and these would be rolled out based on some common standards. In fact, the name already proposed by the Honourable Urban Development Minister Venkaiah Naidu for this card is the National Common Mobility Card. This is proposed to work for buses, trains, taxis and even the Metro. Hopefully, our project will begin in Bengaluru soon, followed by Kochi Metro which will be a full-fledged rollout. In Bengaluru, the card will be issued only by Axis Bank, but as we roll out to new cities, it would be interoperable.
We also have plans for coming out with RuPay credit cards this year.
What is your vision and what are your long-term targets?
People should be primarily transacting digitally, for every need, not relying on ATMs 24x7. If people transact digitally, there will be less movement of cash and consequently, less printing of cash. The government will therefore save a significant amount of expenditure on cash-based systems. The Reserve Bank of India is supportive of our initiatives and the government is also extremely enthusiastic.