There is an urgent need to expand the electronic payments acceptance infrastructure such as ATMs, Point-of-Sale terminals, micro-ATMs, and handheld devices, according to the Reserve Bank of India.
The need is more acute in the under-banked and unbanked segments of the country, the central bank said in its vision document on payment systems in India: 2012-15.
India has one of the lowest numbers of ATMs and PoS terminals per million (or 10 lakh) population. The penetration of ATMs is 63 per million population and that of PoS terminals is 497 per million population.
A fraction of the 10 million plus retailers in India have card payment acceptance infrastructure — presently this number stands at just 0.6 million.
“Use of modern technology such as mobile PoS could be explored to cover the large base of retailers across the country,” the RBI said.
Electronic GIRO
The RBI said that an electronic GIRO instrument (A GIRO transfer is a payment instruction from one bank account to another bank account) for effecting credit transfer by a payer from any branch of a bank or from any other authorised non-bank would be explored.
Further, considering the fact that cheque continues to be a dominant payment instrument in India, the scope of implementing a cheque based GIRO system would be examined.
Bill payments
Pointing out that a large portion of the bill payments are done at the biller’s location (generally walk-in customers), the RBI said there is a huge opportunity for developing a bill payment system for payments towards insurance premia, utility payments, taxes, and school fees.
Among the electronic payments infrastructure, electronic clearing service (ECS) occupies a major share followed by cards and bank account funding in payment of bills.
There is a need for developing an electronic GIRO system for bill payments. One of the prerequisites for developing an electronic GIRO system is the standardisation of biller information, the central bank said.
Substitute cash-on-delivery
The central bank observed that there is a need to substitute the cash on delivery (COD) mechanism through non-cash payment modes like cards and prepaid payment instruments.
While endeavours are on to actively encourage less cash transactions, an anomalous situation is also emerging. Several studies have revealed that a significant percentage of e-commerce (32 per cent) takes place through the system of COD.
The RBI said the COD mechanism has several drawbacks such as costlier order fulfillment, risk of fraud by cash collection agents and high cost of cash handling.
Cashless society
In order to make a decisive move towards a less cash society, it is imperative that transacting through electronic mode is as attractive as transacting with cash. In this regard, the RBI has called for designing a pricing strategy that would influence the payment behaviour of customers which encourages use of electronic products over cash and paper based products.
The central bank also wants banks to draw up a strategy for disincentivising usage of cheques above a certain threshold limit by customers and corporates which may include prescribing a cut off limit for cheques cleared through clearing house arrangements.