Over the last few years, Buy Now Pay Later (BNPL) is steadily gaining popularity. Indian Buy Now Pay later market grew at a CAGR of ~321 % by Gross merchandise value (total value of the loans disbursed to consumers), during FY’19-FY’21. The popularity of BNPL grew during the pandemic when we saw a significant rise in the eCommerce industry.

In India, BNPL is a payment option wherein you can sign up with a company providing this service to pay on your behalf. Then, within a stipulated time, you have to repay the amount. No interest is levied on the same. There are two options. You can either pay it as a lump sum or with no-cost EMIs.

However, if you fail to make the repayment, the lender will charge you interest on your amount, and your credit score will get impacted.

How does BNPL work?

The operational model is usually the same for different BNPL service providers, barring some terms and conditions.

Here’s the primary mechanism:

1. Make a purchase
2. Opt for the Buy Now, Pay Later option
3. Make a small down payment
4. The remaining amount is deducted through interest-free EMIs.

BNPL is different from purchasing with a credit card. BNPL usually doesn’t charge fees or interest. But they have a fixed repayment schedule. What you need to pay per week or month is decided in advance. Also, not all purchases are eligible for BNPL.

In the BNPL model, once the payment is made, businesses receive 100% payment upfront while the customer repays the same to the provider, one installment at a time.

Benefits of BNPL

The BNPL scheme benefits both the businessman as well the customer. Let’s go over some advantages of using this payment method for both vendors and customers-

1. Instant payment received:For vendors, BNPL is a boon. They get paid instantly whether or not the customer pays their installments. This also means that the BNPL providers take all the risks and protect business owners and vendors from fraud and financial loss.
2. Reach more customers:BNPL options are more popular with the younger generation. According to reports, more than 26% of millennials and almost 11% of Gen-Z shoppers used BNPL services for their recent purchases. By providing different payment options, reaching out to a larger audience becomes easy.
3. Increase in conversions: By allowing customers to make payments over time, they get the joy of buying the product instantly, without going through the sticker shock that comes with the price tag. Generally, audiences are more likely to purchase if they can pay for it in installments.
4. Better customer experience:Most BNPL providers don’t have a hard check for financing. Customers get an efficient and more convenient way of registering with them. There is no application, no additional fees, and no extra processing time. Customers can check out in a few steps with ease.

Bottom line

The idea behind BNPL is to let customers immediately get what they want, with a little extra time to pay for them.

Note: In June 2022, RBI issued guidelines that would impact the BNPL model. It stated that nonbanks can no longer load prepaid instruments — digital wallets, or stored-value cards — using credit lines. The RBI said that the only valid options for a buyer are to prefill their wallet with cash or to debit their bank or credit card accounts. RBI also clarified that the BNPL model needs to be examined and guidelines need to be framed for the new scheme in the lending domain.

While this might slow down the growth of BNPL, the story is far from over. We are excited to witness BNPL’s immense potential!

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The fast-emerging digital economy has become a supporting pillar of India’s growth in recent times. At 87%, India hits the highest FinTech adoption rate in the world against the global average of 64%. Realizing that India is a prime destination for digital payments and activities, the Government of India launched Open Network for Digital Commerce (ONDC) to democratize the country’s fast-growing digital e-commerce space.

In this blog, let us explore ONDC with in-depth details and understand how it will help transform the Indian e-Commerce space.

What is Open Network for Digital Commerce (ONDC)

Open Network for Digital Commerce (ONDC) is an open protocol network enabling local commerce segments, such as mobility, grocery, food order and delivery, hotel booking and travel, among others, to display their products and services from all participating e-commerce platforms in search results across all apps on the network.

Globally, ONDC is a first-of-its-kind initiative aiming to create new opportunities and curb digital monopolies by supporting micro, small and medium enterprises and small traders to get on online platforms while providing equal opportunities for consumers. It moves from a platform-centric model (where the buyer and seller use the same platform or application to be digitally visible and do a business transaction) to an open network.

Significance of ONDC

ONDC helps standardize operations like cataloguing, inventory management, order management and order fulfilment, making it simpler and faster for small businesses to be discoverable over the network and conduct business. With this protocol, buyers would have access to more sellers and quick deliveries due to access to hyper-local retailers. Below are some potential benefits of ONDC:

1. Boost E-Commerce transactions:This will enhance the volume and the value of e-commerce transactions. The Government estimates that the Indian e-commerce market will grow to US$ 350 billion by the end of 2030, which seems much more achievable with ONDC.
2. Promotes Competition:According to the Government, existing platforms are tightly controlled, keeping out many small players. However, ONDC will boost competition and foster innovation by start-ups through product and service displays from all participating e-commerce platforms. Furthermore, it will also help to end predatory pricing, especially in high-margin, high-value products.
3. Freedom of Choice:ONDC can make e-commerce more inclusive and accessible for consumers. The platform can potentially discover any seller, product or service by using any compatible application or platform.
4. Cost Reduction for Sellers: ONDC will enable small businesses to use any compatible applications instead of specific platform-centric policies. It will provide multiple options to small businesses to acquire what’s needed to be discoverable over the network without paying deep cuts to aggregator platforms.
5. Attracts Investment: Businesses will benefit from transparent rules, lightweight investment, and lower cost of business acquisition. Their time-to-market and time-to-scale shall also substantially reduce attracting greater investment in the e-commerce space.

How is ONDC different?

ONDC is trying to replicate the success of the Unified Payment Interface (UPI) in the field of Digital Payment. Under ONDC, it’s predicted that a buyer registered on a participating e-commerce site might purchase goods from a seller on another participating e-commerce site. With this open network, the concept extends beyond the retail sector to any digital commerce domains, including wholesales, mobility, food delivery, logistics, travel, urban service, etc.

What lies ahead?

ONDC was rolled in 5 cities, including Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore. According to the reports, based on the pilot exercise and after the network stabilizes, ONDC will be expanded to 100 cities to accommodate 30 million sellers and 10 million merchants online. With this, top banks and other financial institutions will commit to a combined initial investment of 2.55 billion rupees ($32.8 million) in the ONDC project.

ONDC can fulfil India’s aspiration to become a middle-income economy that is digitally unified. It also offers a vital global template for harnessing the technology for and as a public good at a population scale inclusively and equitably.

Time and again, the Indian government comes out with platforms and schemes to help the Indian customer with online payments. DigiSaathi is such an initiative that was introduced on March 8, 2022.

The Reserve Bank of India (RBI) alongwith the National Payment Corporation of India (NPCI) launched DigiSaathi – which will help customers with digital payments including cards. The RBI also launched the UPI123 pay service for offline UPI payments.

According to Shri T. Rabi Sankar, the deputy RBI Governor,

“This initiative will help address customers’ queries in the digital payments umbrella including cards. Right now it is available in two languages – English and Hindi; we are working towards including all vernacular languages. Going forward, human intervention could also be included.”

The customer can submit queries and the most relevant information will be delivered as soon as possible. The questions asked will be examined regularly and the FAQs will be kept up to date.

What is DigiSaathi and how will it help customers?

DigiSaathi is a 24-hour information hotline for digital payments made against goods and services. It is set up and controlled by the NPCI to help the Indian payments industry. Different industry participants have joined to create the website, chatbot, and mobile/web application to help end customers with products and services. This is RBI’s digital vision.

AI bots maintain the backend and they will be taught over time to improve the accuracy of their answers and replies.

The platform is a one-stop destination to obtain help on the entire spectrum of digital payments. It will assist users through the chatbot facility or toll-free calls where users can dial and call out options and products for which they need information.

When a user types in the query, related questions are auto-suggested and you can choose your question from the list. Once you click on the question, relevant information will be displayed.

The working committee for DigiSaathi includes NPCI, State Bank of India, Bank of Baroda, Axis Bank, GPay, Indian Banks Association (IBA) and Amazon Pay, among others.

You can also register complaints and report fraudulent transactions. There are details and email addresses of banks and financial institutions as well.

Visit the DigiSaathi website in case of any queries! The helpline service is also available at 14431 and 1800 891 3333 for support in both English and Hindi.

The service will be made available on more social media channels to fulfil customer requirements.

Neo-banks are online-only fintech companies without physical branches. They are digital banks.

How are they different from traditional banks?

Neo-banks are revolutionizing the traditional banking system by leveraging artificial intelligence (AI) and technology. They offer personalized services to customers. Traditional banks have a physical and maybe a digital presence while neo-banks, led by a design thinking approach, tailor-make their products and services to make banking convenient for the end customer digitally.

Neo-banks are driven by innovation and technology and can develop partnerships and launch features quickly. They cater to small and medium businesses and retail customers.

History of neo-banking

The term neo-bank started gaining popularity in the year 2017 with the rise in the usage of smartphones and the internet across the globe. They are also known as ‘challenger banks’.

As per a report by KBV research, the market size of neo-banking globally is expected to reach $333.4 billion by the year 2026. The CAGR is a whopping 47.1%.

Despite the potential market size, the concept of neo-banks is relatively new in India. Some neo-banking firms have recently raised funding from global investors given the huge underbanked market potential that India has.

India’s top neo-banks include RazorpayX and Jupiter.

How do neo-banks work?

Neo-banks have a different business model than traditional banks. Since they are completely online, customer fees are slashed significantly. Being customer-centric platforms, they can devise personalized services through innovation and technology.

The decisions taken by neo-banks are data-driven. They use technology-led solutions to collect and analyze data and understand customer behaviours. This enables them to offer a wide window of advantages and opportunities to their consumers

What are the challenges faced by neo-banks?

The first issue they face is fostering trust. Customers might not be able to depend on them in case of issues/challenges, as there is no physical presence. Hence, they offer freemium subscriptions and memberships to allow users to experience the service before paying for it.

Due to the absence of regulations, neo-banks cannot offer lending products or accept deposits. Hence, some fintech firms have an NBFC as their parent company to engage in lending activities. They can also rely on bank partners to offer services.

Although India’s smartphone penetration rate is set to increase by 96% by the year 2040, financial inclusion levels are yet to improve.

Advantages of neo-banks

1. Since the regulations are few, neo-banks can keep their costs low. Their products are inexpensive and have no monthly maintenance fees.
2. They offer majority banking services through an app.
3. It allows customers to set up accounts quickly and process requests. Processes that usually are time-consuming, can be done faster with the innovative strategies of neo-banks.
4. Neo-banking apps provide you with smart reporting via an overview of your expenses along with a savings goal best suited for your needs. This enables better management of finances.

Disadvantages of neo-banks

1. Since the RBI does not recognise neo-banks, customers may not have a defined process in case of an issue.
2. Customers don’t have in-person assistance.
3. Neo-banks have expertise in specific products.

Takeaway

The financial landscape is shifting towards customer satisfaction and experience. Neo-banks are attempting to fill that gap. They have the potential to be much more than just a buzzword in the fintech community and hopefully, in the years to come, they will change the face of banking forever!

Today, the fintech industry is continuously disrupting the financial services ecosystem. They are enabling the use of automation to deliver an enhanced customer experience. One such example is API banking. APIs help banks in increasing customer satisfaction, meet the ever-changing needs of customers and provide secure banking solutions.

Banking, as a concept, has been around for ages. Today, they are experiencing a digital evolution. Amidst this, traditional banks are finding it difficult to embrace constant change. Here’s where fintech comes into the picture. Their solutions are transforming banks into customer-centric institutions with a digital address.

In this blog, we will explore how banks and fintech are working together to offer improved banking services and why API banking is fintech’s next big bet.

API banking

API banking focuses on giving the consumer an overall amazing experience through applications, APIs and analytics. Over the last few years, API banking has witnessed immense growth. The reasons include a rise in customer expectations, a rise in the regulatory environment and competition from fintech firms.

Implementation of API in the banking sector

APIs enable ‘easy access’ to banking services and data. They have the transformative potential to become agents of disruption. APIs can help in enabling compliance and simplifying legal systems. They provide an opportunity to innovate and be more efficient. The end customer reaps the benefits in the form of better banking products and services.

Banks are now taking initial steps to enhance their capabilities in terms of business expansion, technology development and customer engagement. Today, India has many tech-first banks. The primary goal is customer-centricity and the vision is to be customer engagers, instead of product pushers.

Fintechs are using API banking services to:

• Control, analyse and track all financial movements in one place
• Give account balances in real-time
• Process faster payments
• Reduce administrative hardships
• Provide enhanced visibility of cash flow
• Have higher flexibility
• Streamline financial services

Data analytics and API banking

Banks can collect data related to customers and create tailored products and services. This can be done with the help of fintech. Fintech firms can offer innovative solutions and better technology that eventually lead to customer delight.

The payment industry is trying to leverage the benefits of API banking and data analytics to create relevant solutions and personalised offerings for customers.

Bottom line

The banking industry is all set for yet another digital revolution and they will need APIs as their arsenal. As customers become more connected and technologically advanced, banks and fintech will succeed only when they successfully innovate new solutions for traditional problems. The financial institutions of the future will stand only if they can keep up with the growing digital transformation.

Financial inclusion means facilitating access to financial products and services to the entire population irrespective of economic and geographic conditions. Accessibility has been an issue in the formal financial system since its inception. However, recent advancements in technology have allowed fintech companies to positively impact the financial service through inclusion.

While 20% of the Indian population is still unbanked, fintech companies are working hard to bank the unbanked and increase the financial inclusion possibilities. By leveraging the existing ecosystem with emerging technologies, fintech makes banking accessible, simple and cost-effective.

The RBI has been of the view that fintech can potentially transform the financial landscape by providing consumers with a variety of financial services at competitive prices. It also opens up upskilling channels for financial institutions as well. Within the Indian financial system, there are large banks, mid-sized banks that include niche banks, small finance banks, regional rural banks and co-operative banks. Fintech and digital players are now the fourth arms of the system and the NPCI has helped provide them with innovative solutions such as Unified Payment Interface (UPI), Application Programming Interfaces (APIs) and Aadhaar-based payments.

Here’s how fintech can lead the way for financial inclusion:

1. Innovation and use of technology:Fintech companies innovate to enable secure digital payments. With AI, they have been successful in creating instant digital payments that allow transfers, verification, cashless buying and selling, and more. They are all about convenience and flexibility. They are also easy to use. From booking LPG cylinders online to paying utility bills has all become clicks.
2. Easy access to credit:Traditional banks typically require a lot of paperwork. Fintech companies, on the other hand, require minimal paperwork. They also use AI for risk assessment on indicators such as income and spending patterns. This is greatly useful for local businesses for micro-financing services and capital investment. Fintech companies also use various tools to educate their audiences. Financial literacy is the way to go forward. Awareness about qualifying for loans and fulfilling credit requirements helps users as well as fintech.
3. Innovation and compliance: Compliances such as identity verification are fewer for fintech companies. Moreover, the RBI has allowed eAadhaar verification and video KYC to promote digitisation and reduce customer acquisition costs. All this works in favour of fintech companies and they can innovate and roll out new features and products faster; while also adhering to government regulations.
4. Reaching far and wide:Internet usage has drastically increased in the country. In areas where physical banks cannot be set up, fintech companies have a massive advantage. They can provide access to basic products and services and help unbanked users save and grow their money. Fintech companies can help uneducated and semi-educated users with easy onboarding. They can also provide customer-friendly services with the integration of AI and ML with Big data.
5. Trustworthiness:Most people are skeptical of online payments due to a lack of trust. Biometric technology plays a major role here. It makes banking faster, more reliable and more efficient. It can ensure the highest level of authenticity and prevents data from getting compromised.

Summary

India has an 87% fintech adoption rate. This is higher than the world’s average adoption rate of 64%. There is no denying that fintech is working towards next-generation financial solutions. They will also without a doubt contribute to financial inclusion.

Thanks to fintech companies’ innovative solutions, the future of financial inclusion in the country look promising.

Technology has revolutionized the banking sector and made the transfer of funds from one account to another incredibly easy. In India, there are different ways of sending money online – RTGS, NEFT, IMPS and UPI. In this article, we will compare and contrast the basics of IMPS, NEFT and UPI. We will also discuss which mode is better for you!

NEFT – National Electronic Funds Transfer

NEFT enables you to transfer any amount to your recipient’s account in a one-on-one transfer. They don’t have a maximum limit of funds that can be transferred in a day. The system is available round the clock, on all days (24/7/365) and funds are transferred in batches and are settled in 48 half-hourly time slots throughout the day. The only requirement is that banks should be NEFT-enabled.

All you need to do is to log in to your net banking portal and add your recipient as a beneficiary to transfer funds via NEFT. Details such as name, account number, account type and IFSC code need to be added under the Add New Payee section.

IMPS – Immediate Payment Service

With IMPS, you can transfer funds electronically from one bank to another without any hassle. The service is available 24/7 and you can transact even on bank holidays. However, it allows you to transfer amounts up to ₹5 lakhs instantly. It is a service offered by the National Payments Corporation of India (NPCI). IMPS transactions are cleared instantly, unlike NEFT which processes transactions in batches. IMPS is also available completely online.

UPI – Unified Payments Interface and QR

UPI is also launched by the NPCI. Using UPI, users can pay directly to different merchants from their bank accounts. There’s no need to type card details, IFSC codes or net banking passwords. At present, the upper limit per UPI transaction is Rs.2 Lakhs. UPI transactions can be done on a smartphone with the internet. However, recently, the NPCI introduced UPI 123PAY.

Through UPI 123PAY, feature phone users will now be able to undertake a host of transactions based on four technology alternatives. They include calling an IVR (interactive voice response) number, app functionality in feature phones, missed call-based approach and also proximity sound-based payments.

Know more about UPI 123PAY on the NPCI website.

With UPI, you cannot transfer funds abroad. But you can receive it through 2 platforms – Wise and Western Union. Currently, 316 banks are live on UPI (April 2022). To perform a UPI transaction, you can PUSH (send money) or PULL (request money).

Unlike IMPS and NEFT, you do not need to add a beneficiary for UPI. One can simply send money through a Virtual Payment Address (VPA) or a QR code. Moreover, a single bank account can be linked to multiple Virtual Payment Addresses. This cannot be done with NEFT or IMPS.

As of April 2022, the value of UPI transactions was 9,83,302.27 crores.

The QR code payment system consists of the acquirer, the issuer and the NPCI (transaction processing engine). It has initiated a new way for customers and merchants to exchange funds using mobile phones. This was introduced in an attempt to encourage more people to use digital payments instead of cash. Some features include low-cost infrastructure, push-based traction, remote management of merchants and customers, and so on.

The QR-based market is advancing at an accelerated pace. Some ATMs can now dispense cash without the use of a physical ATM card. All you need to do is scan a QR code using your UPI account, select your bank account and enter your PIN. This leads to quicker transactions and accessibility, as not everyone carries a wallet or an ATM card.

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With this UPI-based product, you can make peer-to-peer and peer-to-merchant payments without sharing personal details. All you need is the virtual address of the payee to transfer funds instantly. You can also make payments from your bank to any other bank; the process is fully interoperable. It can easily integrate into any app to enable real-time payments and collection.

Mobileware’s QR solution is a winning product that has removed dependencies on POS machines and card payments. It provides you with a simple product that is easy to integrate and provides the user with a ‘WOW’ experience.

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Mobile Banking is essentially having a bank in your pocket at all times. All you need is a smartphone and a banking app that can help take care of all bank related activities. The global mobile banking market was valued at $715.3 million in 2018 and is expected to reach $1,824.7 million by 2026, registering a CAGR of 12.2% from 2019 to 2026.

Over the last few years, digitization of user experience has been a high-level priority for most financial institutions. This has led to an increased usage of sophisticated technologies such as big data, machine learning and blockchain.

Benefits of Mobile Banking

Mobile banking apps not only help in managing money but also offer convenience and advantages. Listed below are some benefits that are worth enjoying.

1. 24X7 access:Unlike a traditional bank with fixed working hours, mobile banking is accessible at all times. This saves a lot of time. You can deposit a cheque or make payments across the world — while sitting on your couch! Some apps also use real-time notifications and smart geolocations for easy assistance.
2. Money optimization:Banking apps can also be used to understand monthly expenses like never before. Some apps help you organize your digital money and aid you in savings. Algorithms are designed to spot when you are spending excessive amounts, forecast your spending patterns and provide you with opportunities to save money.
3. Better security:Apps usually ask you for a username and password when you log in to a mobile banking app. You can additionally incorporate multifactor authentication, for example, a code is sent to your phone for transfers above a certain amount. Apps also let you scan your face or use biometric authentication to protect your digital banking experience.
4. Add-on benefits:Several mobile apps extend different offers such as personal loans, schemes and extensions of credit card limits to their users. AI-based algorithms can also help the user make important financial decisions based on their past spending habits. Apps are a great way to manage investments too.
5. Intuitive banking:Banks are focusing on making investments in technology to improve the overall customer experience. New developments make banking interfaces easier, personalized and convenient to use. Banking apps can offer a comprehensive view of your financial holdings, expense schedules and easy to understand charts at the click of a button.

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We provide you with a unified platform that helps you in getting the work done online – with the touch of a button. Having helped various banks and financial institutions find a place in the digital world, we aim to give the users a seamless banking experience at their fingertips.

Mobileware Technologies provides a unified platform for all channels, such as mobile banking, SMS banking, and more. The solution can be integrated with ease with all major database softwares and has the highest security with AES encryption. Threshold checks on transactions limit and velocity security are at the product’s core.

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The Road Ahead

The ecosystem of mobile banking is user-friendly and focuses on providing an advanced experience to users. Some exciting trends to look forward to include touchless transactions, transaction-based insights, AI-powered services to provide customized financial advice, voice command, and so much more.

Users need stable, intuitive and secure mobile banking apps. Mobile banking is fundamentally redefining the way banking is done and the future is full of exciting opportunities and technologies!

The basics of e-RUPI

Contactless and cashless digital payment solution – e-RUPI – was launched on 2nd August 2021, under the ‘Digital India’ initiative. The National Payments Corporation of India (NPCI), developed this solution in association with the Department of Financial Services, the Ministry of Health and Welfare, and the National Health Authority. It is a digital voucher that is person-specific and purpose-specific and can be used to deliver social security benefits.

Working of e-RUPI

e-RUPI is a contactless digital payment system that is delivered to the mobile phones of beneficiaries in the form of a QR Code or an SMS String. It works like a prepaid voucher, redeemable at accepting centres without any credit or debit card, a mobile app, or Internet Banking. They act like e-gift cards.

NPCI will connect the sponsors of the services with the beneficiaries and service providers digitally, without any physical interface. The users can redeem the voucher without a card, a payments app, or internet banking access at the service provider. The payment will be authorised by institutions such as the government and banks.

e-RUPI should not be confused with Digital Currency that the RBI wants to introduce. Instead, it is a purpose/person-specific digital voucher.

Issuing vouchers

NPCI has onboarded banks that will act as issuing entities. The beneficiaries will be verified through their mobile number (OTP verification by Aadhaar). A voucher will be allocated in the name of the given person and delivered to the same person only. Even if there is no bank account or a smartphone, these vouchers can be used to access benefits.

e-RUPI technology stack is provided to two of the 11 live banks as per NPCI. The two banks being, Punjab National Bank and Bank of Baroda.

Use cases

As mentioned, e-RUPI will deliver welfare services. It can also be used for delivering services under various government schemes meant for providing nutritional support and drugs under Mother and Child welfare schemes, TB eradication programmes, drugs and diagnostics under schemes such as fertilizer subsidies, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana, etc. The NPCI has also tied up with hospitals where e-RUPI can be redeemed.

Benefits for users

• Easy and secure:The voucher can be authorised simply with a verification code shared by the beneficiary.
• Hassle-free and contactless payment solution:There is no need for handling cash or cards.
• Quick redemption:The voucher can be redeemed in a few steps.

Benefits for corporates

• Cost reduction Since the transaction does not require any physical issuance of a card or voucher, it leads to a reduction in costs.
• Maximum visibility Issuers can track the voucher redemption process.
• Safe:The transactions are quick, contactless, and safe.

Banks live with e-RUPI

Banks such as the State Bank of India, HDFC Bank, ICICI Bank, IndusInd Bank, Canara Bank, Bank of Baroda, Punjab National Bank and Axis Bank are a part of the e-RUPI solution. More banks and payment apps are on their way to join the initiative.

Takeaway

e-RUPI aims to help everyone achieve targeted, transparent, and leakage-free digital money delivery. It is an excellent step in connecting people’s lives with technology. We hugely welcome this move!

The NPCI has been promoting and managing digital transaction platforms in India since 2008 and is backed by more than 50 retail banks. They have, over the years, introduced payment channels like RuPay, Bharat Bill Pay, IMPS, and many others. However, due to the exponential rise in internet traffic and subsequently, frauds and cyberattacks, it has become difficult for NPCI to manage everything on their own. Therefore, in an attempt to address this ‘risk concentration’, the RBI in 2020 invited private companies to set up a new platform – New Umbrella Entity (NUE). The idea behind this initiative was to reduce the dependence on NPCI and create an alternate mechanism for digital payments for the country.

As per the RBI, NUE is a non-profit entity that will be formed and incorporated in India under the Companies Act, 2013. It can also be a ‘for-profit’ or a company under Section 8.

In addition to reducing the concentration of cyber risks, sharing responsibilities between the NPCI and NUEs will pave the way for an improved digital payments ecosystem. It will also lead to healthy competitiveness, which in turn will ensure better and effective products and services. The future of the payment system will be more interoperable.

Let’s take a detailed look at the activities and the framework of NUEs, as per RBI guidelines.

Scope of activities:

1. Set-up, manage and operate new payment system(s) especially in the retail space comprising of, but not limited to, ATMs, White Label PoS; Aadhaar based payments and remittance services; develop new payment methods, standards and technologies; monitor related issues in the country and internationally; take care of developmental objectives like enhancement of awareness about the payment systems.
2. Operate clearing and settlement systems; identify and manage relevant risks such as settlement, credit, liquidity and operational and preserve the integrity of the system(s); monitor retail payment system developments and related issues in the country and internationally to avoid shocks, frauds and contagions that may adversely affect the system(s) and/or the economy in general.
3. Fulfil its policy objectives and ensure that principles of fairness, equity and competitive neutrality are applied in determining participation in the system; frame necessary rules and the related processes to ensure that the system is safe and sound and that payments are exchanged efficiently.
4. Carry on any other business as suitable to further strengthen the retail payments ecosystem in the country.

Framework:

• • Owned and Controlled by Residents: The promoter or the promoter group for the NUE should be ‘owned and controlled by residents’ with 3 years’ experience in the payments ecosystem.
  • The shareholding pattern should be diversified. Any entity holding more than 25% of the paid-up capital of the NUE will be deemed to be a promoter.
  • Capital: The umbrella entity shall have a minimum paid-up capital of Rs. 500 crore.
  • No single promoter or promoter group should have more than 40% investment in the capital of the entity.
  • A minimum net worth of Rs. 300 crore should be maintained at all times.
  • Governance Structure: The NUE should conform to the norms of corporate governance along with ‘fit and proper’ criteria for persons to be appointed on its board.
  • The RBI retains the right to approve the appointment of directors as also to nominate a member on the board of the NUE.

Impact:

As of May 2021, four consortiums have submitted applications for the National Umbrella Entity (NUE) licenses, which will allow firms to build a real-time payment platform for India. These consortiums include companies such as Silicon Valley giants Facebook and Google, and India’s largest businesses like Reliance Industries, Tata Group, HDFC Bank, and ICICI Bank.

With the introduction of NUEs, there will be a plethora of payment options for consumers, due to competition. India aims to become a cashless economy and NUEs are a great step towards that goal. It also ensures that the digital payments arena will expand and be more financially inclusive by reaching far and wide into India’s unbanked areas. This is a great opportunity for financial inclusion in the country!