How RBI’s geo-tagging framework can improve digital payment infrastructure
Ketan Patel writes
Credit and Finance for MSME: The framework for geo-tagging of payment system touchpoints, launched by the Reserve Bank of India (RBI) in March ’22, is an important step towards building a strong pay-as-you-go infrastructure in the country. The framework provides for the collection and retention of merchants for banks and non-bank payment service operators (PSOs), which are MSME, related information and geographical coordinates for all payment touchpoints. More banks and non-bank PSOs will have to provide this geo-tagging information of payment touchpoints to the RBI.
Geo-tagging of payment points such as POS, QR codes, etc. can provide useful insights into the regional penetration of digital payments and its distribution across the country. These insights can be used to identify opportunities to set up additional payment touchpoints to further enhance digital acceptance. Also, it has been noticed that despite the availability of digital payment touchpoints in certain places, especially in rural parts of the country, a large number of people continue to use cash as the primary mode of transaction. Geo-tagging data can be used for adopting a focused digital literacy program to better adapt the deployment payment infrastructure for digital transactions.
The RBI is making a concerted effort to promote electronic payment systems in the country. The Payment and Settlement Systems Act, 2007 laid the foundation for modern, efficient, fast and affordable payment infrastructure in the country. The Payment Systems Vision Document, released by the RBI in 2012, proposed to actively encourage electronic payment systems to enter the low-cash society in India. The latest Vision Document released for 2021 empowers every Indian with access to a bunch of secure, secure, convenient, fast and affordable e-payment options.
To achieve the above, the vision envisions four goal-posts (4 Cs) – competition, cost, advantage and confidence. Action points emphasizing four specific goalposts The RBI has issued various guidelines in the last two years such as Offline Digital Payment Solutions (January 22), New Umbrella Entity (NUE) Approval Framework for Retail Payments (February 22), Payment Gateway Service Providers and Control of Payment Aggregators (Mar’21), Guidelines for Tokenization of Card Transactions (Sep’21) etc. Geo-tagging of payment system touchpoints was outlined as one of the goals of building customer confidence. It was mentioned that in order to measure the acceptance of digital payments, it is essential to have the geographical location of the payment system touchpoints across the country.
The RBI said in its monetary policy that deepening the penetration of digital payments across the country was a priority for financial inclusion. The RBI has set up the PIDF, Public Infrastructure Development Fund with a corpus of Rs. Further, the IT Ministry has launched a special drive with the Ministry of Housing and Urban Affairs to start accepting and making digital payments under the PM Swanidhi scheme for onboard street vendors.
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The two schemes have helped bank and non-bank payment aggregators invest in Level 3, Tier 4 and more in-house locations over the past year to set up digital payment infrastructure. Based on the results, the government has decided to continue the PM SVANidhi scheme till December 2024. However, to ensure a balanced spread of acceptance infrastructure across the country, information on the location of existing payment acceptance infrastructure is essential.
The location information of merchants may be matched with other data points such as population, population, population group, high economic and commercial activity, high merchant density, etc. This will help to monitor the density of the infrastructure in different locations and to optimize the distribution of the payment infrastructure.
Geo-tagging of Payment TouchPoint can help in better digital payment fraud and risk management thus bringing more confidence in digital payments. The RBI and banks collect data on chargebacks and transaction fraud at the merchant level. By mapping chargeback and fraud data with merchant location data, banks and payment service providers can identify negative or high-risk locations that can help them better define risk control and KYC policies.
Geolocation data cards can also help identify irregularities in current transactions if the same card is presented for transactions in remote geography on the same day. This information can be relayed to the merchant and the transaction can be identified as potential fraud. In the case of POS devices, banks and payment service providers may also benefit from using geo-tagging of merchants as a low-cost verification tool that provides additional confidence and information about the existence of their devices thus ensuring their easy identification and retrieval. Physical resources.
The RBI has placed responsibilities on banks and non-bank PSOs to ensure the accuracy of merchant and location details related to the payment touchpoint. All bank and non-bank PSOs will be solely responsible for ensuring data about the payment touchpoints employed and the merchants acquired by them are kept up to date and accurate and required information is communicated to the RBI in due course. This will enable accurate monitoring of the availability of the payment acceptance infrastructure which will in turn benefit the RBI for appropriate policy interventions wherever needed to achieve the policy objective of deepening digital payments and providing inclusive access to all citizens of the country.
Ketan Patel is the CEO of Mswipe. The published opinion is the author’s own.
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