RBI fuels Innovations in Digital Payments

Migration to digital modes of making a payment can obviate some of the costs associated with a cash economy and can give customers a friction-free experience. 

At present, general innovation in mobile payment services has focussed on or supported app-based access limited to smartphones and such devices. 

There is a need to innovate payment services for feature phones to provide the necessary thrust towards enhanced adoption of digital payments by various strata of society.

Consumer behaviour has been driving the growth of digital payment systems as more and more consumers are embracing mobile technology. Though mobile internet speed has risen, connectivity issues remain unresolved in large areas.

Therefore, providing an option of off-line payments through mobile devices for furthering the adoption of digital payments is required.

Contactless payments, while decreasing the time taken for payment checkout, also ease payments for small-ticket payment transactions. Tokenisation technologies often form the basis of facilitating seamless e-commerce experiences fuelled by mobile and other connected devices.

The rapid growth in devices provides a significant opportunity for payments through any form factor and anywhere.

In its endeavour  to reduce transactions failures caused by slow internet  speed in the rural areas an also to promote innovation in the offline payment space using contactless and NFC mechanism , on 4th Nov.2019 , Reserve Bank of India (RBI)  announced the opening of the first cohort  under the Regulatory Sandbox (RS)  with ‘Retail Payments’ as its theme to spur innovation in digital payments space  across three sectors – Offline Payments, Feature Phone-based Payments and Contactless Transactions.

This would eventually help in offering payment services to the unserved and underserved segment of the population.

Reserve Bank Innovation Hub (RBIH) has also been setup by RBI in Nov.2020 for promoting innovations across the financial sector by leveraging on technology and creating an environment which would facilitate and foster innovation. RBI has appointed Senapathy (Kris) Gopalakrishnan, co-founder and former co-chairman of Infosys, as the chairperson of RBIH.  

RBIH will collaborate with financial sector institutions, technology industry and academic institutions and coordinate efforts for exchange of ideas and development of prototypes related to financial innovations

The aim of the facility is to create an eco-system that would "focus on promoting access to financial services and products. This will also promote financial inclusion.

While the application to the first cohort had opened back in November 2019 , programme implementation and selection of the finalists had been delayed due to COVID-19 pandemic. Under the first cohort of Regulatory Sandbox (RS), out of 32 applications received 6 entities were selected by RBI. Two entities have commenced testing of their products from November 16, 2020 while remaining four entities selected for the ‘Test Phase’ have started testing of their products as per details below: 

1.     National Support Consultancy Services of Jaipur : They are testing its product named 'eRupaya', which is NFC based Prepaid Card and an NFC enabled Point of Sales (POS) terminal which will allow digital payments to take place completely offline. 

2.     Nucleus Software Exports of Noida : Working to connect rural areas with electronic payments, mainly by leveraging the self-help group network. They are  trying to create a digitised self-help group using their payment solution PaySe? which is an offline and online digital cash solution designed to democratize money and move towards a cashless society at all levels. 

PaySe is a financial inclusion enabler for financial institutes as it makes basic banking services accessible to the unbanked in upcountry & remote geographies. It also makes loan disbursement and collection totally cashless.

3.      Tap Smart Data Information Services Private Ltd. (CityCash), Mumbai : The product is a set of NFC based Prepaid Card and NFC enabled Point of Sale (PoS) device, to facilitate offline Person-to-Merchant (P2M) transactions. The card can be used as travel pass and wallet to pay for purchase of bus tickets as well as payment at select merchants.(Testing started from December 14, 2020) 

4.     ToneTag (Brand of Naffa Innovations Pvt. Ltd.) Bengaluru : The product is an offline, feature phone-based UPI payment solution for P2M transactions over ‘sound medium’ by establishing a secure channel for data transfer over Interactive Voice Response (IVR) between devices. The product enables contactless payment even without internet.

ToneTag harnesses the power of sound to build a robust channel of data communication to enable extraordinary experiences across businesses. The technology utilizes a proprietary software which gives way for quick and easy data communication. Being a software element, it can easily be integrated into existing hardware, making it interoperable and platform independent. Protected with multiple layers of security, data security is our number one priority. 

The technology provides unparalleled convenience and experiences for a multitude of use cases across the payments, retail and mobility sector. We empower small merchants in remote areas to large MNCs to understand, reach and engage with their customers with a simple but futuristic technology. (Testing started from December 14, 2020) 

5.     Ubona Technologies Pvt. Ltd. Bengaluru : The voice-based UPI payment solution facilitates offline Person-to Person (P2P) and P2M transactions using mobile phones including feature phones. The product also offers convenience of preferred Indian language to the customer through IVR, making adoption of digital transactions user friendly. (Testing started from December 18, 2020) 

6. Eroute Technologies Pvt. Ltd. , Noida : The product is UPI based offline payment solution using SIM overlay smartcard placed on the SIM to drive SIM Tool Kit (STK) menu- based user interface to facilitate P2P/P2M transactions. 

This product offers payment solution to non-internet connected feature phone users which is based on its patented core technology SIMoME? (Thin SIM), which decouples value-added services from the main SIM, and empowers industry players the ability to deploy innovative services on the mobile equipment. (Testing started from December 21, 2020) 

These six  fintech are now operating and testing their products under protected environment of the Regulatory Sandbox. Here, they will have to show their system's preparedness while dealing with dummy data. Once they achieve success within the protected environment, the systems will be allowed to be tested in the live environment with actual banks and consumer data.

I have been part of growth journey of  most of these selected fintech and would like to congratulate them for selection and wish them God Speed in their endeavours.

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