Relevance: GS-2: Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures

Key Phrases: Geotagging, digital payment, geographical identification, GPS-enabled electronic devices, QR codes, NPCI, Banking infrastructure, Cash Recycle Machines, Payment System Operators, RBI’s Centralised Information Management System, BHIM Aadhaar.

Context:

• RBI has passed a framework for geotagging of digital payment touch points.

What is Geo-tagging of payment system touch points?

• Geo-tagging refers to the process of adding geographical identification to a media based on the location of smartphones or GPS-enabled electronic devices.
• Geo-tags can be applied to media such as photos, videos, websites, text messages and QR codes.
• Last week, the Reserve Bank of India issued a framework for geo-tagging of payment system touchpoints, which simply means capturing the geographical coordinates (latitude and longitude) of various touchpoints deployed by merchants to receive payments from their customers.

Need For a Geotagging Framework

• Smartphone and internet penetration has led to proliferation of digital payments in the country.
• According to data from the National Payments Corporation of India (NPCI), UPI-led digital transactions crossed the highest-ever value of Rs 81-lakh crore with 5.42 billion transactions in FY22.
• However, a large number of people, especially in the rural parts of the country, continue to use cash as the primary mode of transaction.
• RBI’s geo-tagging framework focusses on deepening digital payments and providing inclusive access to all citizens, irrespective of their location or digital literacy.

How Does It Work?

• The central bank has categorised ‘Banking infrastructure’ and ‘Payment acceptance infrastructure’ as two categories of physical infrastructure through which digital payment transactions are carried out.
• Banking infrastructure covers payment transactions made through bank branches, counters, ATMs and Cash Recycle Machines (CRMs), among others.
• While point of sale terminals, QR codes deployed by banks / non-bank Payment System Operators (PSOs) come under payment acceptance infrastructure.
• The RBI framework mandates that banks and non-bank PSOs should maintain a registry with accurate location of all payment touchpoints across the country.
• The registry must contain merchant-related information such as the merchant’s name, ID, type, category, contact details as well as location details such as address and state, district.
• Banks and non-bank PSOs must also report payment acceptance infrastructure details such as the terminal type, terminal ID, terminal address, state, district and geo-coordinates.
• All banks and non-bank PSOs are required to report information on payment system touch points through the RBI’s Centralised Information Management System (CIMS). However, the central bank is yet to communicate the timeline for commencement of reporting.

How will it benefit banks and players in the payment ecosystem?

• By capturing the accurate location of various payment system touch points, banks can get insights on regional penetration of digital payments, monitor infrastructure density across different locations, identify the scope for deploying additional payment touch points, and facilitate focused digital literacy programmes. The data collected through geo-tagging will also help the central bank bring suitable policy interventions wherever required.

Government Initiatives to Promote Digital Payments

• Finance Minister Nirmala Sitharaman made announcement during her Budget 2022 speech to set up 75 digital banking units in 75 districts.
• It also stated the inclusion of all 1.5 lakh post offices under the core banking system, digital currency, and financial support to promote the use of digital "Faceless, Paperless, Cashless" economy.
• Digital payment transactions targets have been assigned to Central Ministries with high citizen touch points, Public Sector and Private Sector Banks under the DIGIDHAN MISSION of meity.
• Training and workshops on digital payments awareness with several Ministries have been conducted and planned; MoRTH, MoHFW, Ministry of Agriculture, MSME, Department of Post, Ministry of Power, Panchayati Raj, Ministry of Defence.
• Promotional materials on publicity of digital payments including IEC materials are being shared with stakeholders to create awareness and sensitization
• Digital Payment dashboard has been created to track and monitor the progress of digital transactions achieved by Banks
• Promotion and awareness approach framework on digital payments has been shared with Banks
• BHIM cash back schemes for merchants
• BHIM Aadhaar merchant incentive schemes
• BHIM referral bonus schemes for Individuals

Future Impact

• The digital payment landscape in India is undergoing a massive transformation. Indian consumers have shown tremendous affinity to digital technology leading to rapid growth of digital payment infrastructure.
• The payment ecosystem comprises of Banks, Fin-tech and Startups. Presently, Major technology players, with large user base, are using UPI platform for providing payment services. They are playing vital role in expansion of digital payments.
• Forward looking Regulatory and Government policies, industry-led collaborative decision making and adoption of new technologies in digital payments have made India to shine on the world map.
• Merchant payments are one of the most effective methods to inculcate the positive behavioural change towards usage of digital payments modes. The merchants are adopting multiple channels for accepting digital payments: BHIM-UPI, QR code (PPI & UPI), PoS & BHIM Aadhaar Pay.
• Digital platforms like BHIM UPI, RuPay, One Nation One Card (NCMC) and Aadhaar based payment systems continue to be lauded as innovations worldwide.
• The indigenous RuPay and BHIM UPI also aspire to expand its footprints in the international markets. The efforts are to enable countries where large number of Indian diaspora resides, popular tourist locations, high foreign inward remittances and trade.

Conclusion

• While the quest for a less-cash society continues, the endeavour is to also ensure increased efficiency, uninterrupted availability of safe, secure, accessible and affordable payment systems as also to serve segments of the population which are hitherto untouched by the payment systems. The decade to follow will witness a revolutionary shift in the way Indian citizens use digital payment options and will also empower them with an e-payment experience that will be exceptionally safe, secure and truly world class.

Source: The Hindu BL

Mains Question:

Q. Discuss the RBI framework for geotagging of payment system touch points. How will it benefit banks and players in the payment ecosystem? Examine.