The Reserve Bank of India (RBI) has recently come out with its Payments Vision 2025 initiative, which is designed to provide secure, convenient and cost-effective E-payment solutions to all users.

It is an extension of the initiatives built for Payments Vision 2019-21. The basic concept of the document revolves around '4Es,' which focuses on enhancing the availability of E-payments to Everyone, Everywhere, Every time.

The RBI has bifurcated its objectives and vision in the Payments Vision 2025 plan into five distinct key areas comprising of Integrity, Inclusion, Innovation, Institutionalization, and Internationalization.

What are the Core Objectives & Goals of RBI Payments Vision 2025?

The initiative aims at elevating the usage of affordable payment options, which users can access at any given point of time, conveniently.

Objectives

Geo-tagging Digital Payments

The document suggests the use of geo-tagging to track the location of payment systems and transactions. Additionally, it also recommends a review of the regulations for prepaid payment instruments (PPIs), including those designed for closed systems.

Supervising Key Intermediaries

The Central Bank has also suggested a framework under which supervision of all major intermediaries coming under the payments landscape will be initiated. Linking credit components associated with banking products to Unified Payments Interface (UPI) has also been proposed.

Enhancing Cheque Truncation System (CTS)

To enhance Cheque Truncation System (CTS), including One Nation One Grid clearing and settlement perspective, and also create an online payment framework to process merchant payments online using mobile and mobile banking.

Control Over BigTechs and FinTechs

The proposal includes strict control over major players including BigTechs and FinTechs operating across the vast payment landscape.

Exploring Buy Now Pay Later (BNPL) Services

Establishing a process for regular review and updating guidelines to keep pace with changes in the BNPL industry.

Goals

Minimizing Cheque-Based Payments

Reducing the volume of cheque-based payments to less than 0.25% of the total retail payments.

Promoting Digital Payment Transactions

Aiming for a substantial increase [3x times] in the number of digital payment transactions.

Boosting Growth of UPI, IMPS, and NEFT

Targeting robust annualized growth rates of UPI at 50% and IMPS/NEFT at 20%.

Enhancing Payment Transaction Turnover

Increasing the payment transaction turnover in relation to the Gross Domestic Product (GDP) to reach a ratio of 8.

Promoting Debit Card Usage at Point of Sale (PoS)

Foster a 20% increase in debit card transactions at Point of Sale (PoS) terminals, promoting the convenience of card-based payments.

• Focussing on Debit Card Usage: Encouraging debit card usage to surpass credit card transaction value.
• Scaling Prepaid Payment Instrument (PPI) Transactions: Targeting a 150% increase in transactions involving Prepaid Payment Instruments.
• Expanding Card Acceptance Infrastructure: Facilitating the growth of card-based transactions by increasing card acceptance infrastructure to 250 lakh.
• Augmenting Mobile-Based Transactions: Aiming for a 50% Compound Annual Growth Rate (CAGR) in the registered customer base for mobile-based transactions.
• Reducing Cash in Circulation (CIC): Implementing measures to reduce Cash in Circulation (CIC) as a percentage of GDP.

How Will This Move Impact the Payment Industry?

• 1. Enhance Accessibility and Affordability: By offering cost-effective payment solutions, it will enhance easy, anytime access.
• 2. Transition Towards a Digital Society: In promoting the shift to digital payment methods from traditional ones.
• 3. Bolster Global Leadership: Reinforce India's position as a global leader in digital payments.
• 4. RTGS Expansion: Transactions in key international currencies like USD, GBP, and EUR, potentially via bilateral or multilateral agreements.

What are the Potential Issues & Challenges That Might Come Across After Implementing this Vision?

• Geopolitical Risks: The document outlines processes to safeguard domestic payment systems, which involves mandating the processing of payment transactions within the country owing to emerging geopolitical risks.
• Frauds: An increase in digital payment modes is going to attract frauds, which need to be handled tactfully.
• Domestic Data Storage: Banks and Payment System Operators can process international transactions, which would pose a challenge.
• Costs: The Reserve Bank of India will have to undertake a detailed review of all the available options related to costs involved in different digital payment channels.

The RBI Payments Vision 2025 is a comprehensive initiative, which has the potential to transform India's payment landscape by leading the country towards a digital-first society.

By taking the right steps, and implementing proper planning disclosed in the document, it can reshape India's payment ecosystem to a great extent, making its digital transformation journey a reality.