Several updates from the Reserve Bank of India (RBI) can accelerate the use of digital payments and the safety of card transactions in India:
- The deadline for card issuers to upgrade to EMV has passed.Three years ago, the RBI set a December 31, 2018 deadline for banks to switch to issuing EMV chip cards for both debit and credit cards to prevent fraud, according to India Today. The deadline has now passed, leaving some consumers unable to use their cards if they have not yet been upgraded. A nationwide migration to an EMV standard could decrease counterfeit fraud among existing devices in India much like it did in the US, where counterfeit fraud decreased at EMV-enabled merchants in by 75% between September 2015 and March 2018. Although POS penetration in India is low — more than 90% of merchants only accept cash — an EMV shift could position the country well and enable safe transactions as more merchants accept noncash payments.
- Paytm Payments Bank (PPB) was given permission to resume onboarding new customers following a six-month freeze.The RBI gave PPB permission to resume operations and onboarding customers six months after it told the bank to temporarily stop enrolling new customers, according to Live Mint. PPB was initially instructed to pause operations in June after the RBI questioned its compliance with the Know-Your-Customer (KYC) protocol and the Prevention of Money Laundering Act. For context, payments banks were created by the Indian central bank as a way to expand financial inclusion, and they function largely like regular banks, but can’t issue loans or credit cards and must adhere to a deposit limit. PPB counts more than 320 million registered users, and there has likely been demand among more consumers to use its services given that 191 million Indian consumers are unbanked. Additionally, PPB recently appointed a new managing director and CEO, which can help ensure that it remains compliant with regulations so that it doesn’t face future regulatory growth obstacles. PPB’s success can also boost Paytm, its affiliated major mobile wallet, and ensure it continues to see success in the market.
- WhatsApp is still awaiting permission to complete its roll out in India.WhatsApp officially counts 210 million users in India, but has yet to launch full operations of its payment product, according to PYMNTS. WhatsApp initially launched a beta test for its payments service in India in February 2018, when it reached 1 million users, but its full launch was delayed by the Indian government over privacy concerns. And although its launch was delayed, WhatsApp was the only multinational firm to meet the RBI’s October deadline to comply with regulations that mandate domestic data storage. The firm has since requested permission from the RBI to launch its payment services, and while the status of its impending launch is unclear, WhatsApp could gain an edge over its multinational competitors at a time when the space is becoming increasingly crowded and competitive. WhatsApp’s existing user base for its chat app gives it a compelling advantage over competing services, and when it does finally roll out in full, the service has the potential to be a threat to leading mobile wallet Paytm.
It’s imperative for firms to comply with RBI regulations to ensure they can operate amid the rise of digital and noncash payments in India. Indian mobile payments are expected to grow from $200 billion last year to reach $1 trillion by 2023, according to a Credit Suisse estimate, opening up a massive volume opportunity for firms to capitalize on. But with the central bank cracking down on both domestic and multinational players, compliance is more important than ever.
BI Intelligence Content Marketing