The face of National Payments Corporation of India (NPCI), A P HOTA, strongly believes that NPCI is a processor with difference. MD and CEO of NPCI, Hota, has spent significant portion of his career in designing and implementing payment systems in the country. He has been associated with the organisation since its inception. Before getting this opportunity, Hota was with RBI from 1982 to 2009 and he continues to be part of various committees of central bank. In conversation with R N Bhaskar…
Is NPCI ready for the huge transition that India will go through to become a cashless society, post demonetisation?
In NPCI’s vision statement, it is stated that we will touch every Indian through one or another electronic payment by 2020. Demonetisation and move towards digital payments, is as per its vision statement.
At present, there is MasterCard and Visa, and there are other gateways. Would we look at unified gateway?
We are considered to be “umbrella organisation of all retail payment system in the country.” We have taken over three retail payment processes from RBI – ATM, cheque clearing and ACH. We have built four systems in subsequent three-four years. In the current year, we are building five systems. In total, we are building 12 payment systems. We organise clearing and settlements for various types of retail transactions.
Only one segment of NPCI can be compared with Visa and MasterCard, as we have built various systems. So far, we offer Rupay debit card. The cards are issued by the banks, but the rules and regulation related to Rupay card payment are monitored and implemented by us. We are competitors to Visa and MasterCard. We are a domestic card company that has tied up with Discover of USA.
As per the Payment and Settlement Systems Act 2012, RBI continues to be a regulator and we are a processor. We are a processor with the difference, as we process variety of retail payment transactions. There are many other processors. They have got authorisation like us but they have got authorisation for one or two systems. Also, there are aggregators. But we are a processor with end-to-end activities, leading to settlement in the books of RBI.
How did Rupay come into existence? Does it have anything to do with Master Card and Visa stopping its processing in Russia?
The idea of Rupay came into existence in 2005-06 and was ideated by RBI. Indian Banks Association had studied the feasibility of the domestic card payment system to introduce competition in the country. Banks requested 2009-formed NPCI to take up the task. RBI was very keen that a domestic player comes into the market. We took over that role.
In 2014, Russia had witnessed this (ban by MasterCard and Visa) and India introduced Rupay, which was a mere coincidence. However, India had anticipated well in advance issue of such nature could arise. For a country with such huge population and growing at such rapid pace, a payment system of its own was the need of an hour.
Also, China has its own system called China UnionPay. China banned MasterCard and Visa. But in India it is a market economy. So, it allowed them to operate. For a domestic card company to compete with them on the principles of efficiency and market forces is rather difficult.
First, NPCI has a strategic advantage with PSBs and second, you can offer competitive rates. So, is NPCI at an advantage?
Here is where the dilemma lies. Even with public sector banks (PSBs), the government has control over it but it is off limited nature on day-to-day basis. The decision of the bank to issue a card lies with the management of the bank. Only in case of Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme which is a scheme of the government, it was made mandatory to give Rupay card to the account holders. In other cases, the banks have free choice whether they issue Visa, MasterCard or Rupay.
Today, we have 315 million cards, out of which 119 million cards are PMJDY cards – only this portion of cards came with the government mandate. In the country, there are 775 million cards and we have reached almost 50 per cent. We are the largest issuer of debit card in the country, although, we are not the largest transaction card company.
The largest continues to be Visa as their customer base is mainstream customer base. Our customers are PMJDY customers who are entering the banking segment. On the other hand, the country has 30 million credit cards and we are going to launch Rupay in the credit card segment as well. We plan to release the credit card in December or early January (definitely before January 15, 2017). We have one advantage over MasterCard and Visa. Our fee to banks is one third of that of MasterCard and Visa. The charges paid by merchant establishments are uniform to all card providers.
Banks should ideally choose Rupay over MasterCard and Visa but that is not the case. The mindset here is that MasterCard and Visa is a global card company. But in fact 93 per cent of the card is used domestically.
There is no need for a customer in a small town to get a global card. But they dump the international card on the poor person. At times, these cards are marketed so well that people end up buying that. The mindset is that anything foreign is good but we hope that in course of time this mindset changes.
By when do you think all the banks will accept NPCI?
For decades, MasterCard and Visa were there in the country. In this time frame, these companies bought only 54 banks into the payment systems. As of now, we have close to 700 banks in our card payment system which includes public, private, regional and rural bank. In case of co-operative banks, we will add them as and when they are getting core banking enabled.
Next, logical step for co-operative banks is to go for cards. For cooperative banks to function smoothly, they require a 24X7 banking system. This would enable the customers to go and draw cash at any point of time.
Nonetheless, 95-96 per cent of bank customers are already part of Rupay network. The remaining are the small co-operative banks like district-level co-operative banks. Only few months back, they got the core banking system. So, they need to adopt additional software to facilitate the card system.The question is about they getting ready and NABARD is monitoring them on this. It all depends how quickly they support rural co-operative banks.Under district co-operative banks, there are 1,000 of banks and credit societies. They are not banks but are non-banking accounts. We cannot issue them cards. There is lot of strategies that has to be developed for them.
Where does NPCI stand in terms of transactions?
In number of transactions, we are still number three. Visa is first and second is Master Card. In ATM channels, our market share is about 28 per cent. Our card transaction is about 42 per cent. In terms of point of sale (POS) and e-commerce transactions, we are about is 8-10 per cent. We need to work in E-commerce and POS space. The reason for small number in POS and e-commerce is because most of our cards are used by people in rural areas and there is a lack of infrastructure there. With the more POS across the country, we are optimistic that these figures will jump.
How can NPCI mitigate the security risks?
Unified Payment Interface (UPI) is highly secure and Immediate Payment Service (IMPS) is secure enough. Except in academic literature, I have not seen any large scale fraud taking place. Thirdly, USSD (Unstructured Supplementary Service Data) has got some limitation which is why the RBI has limited the amount of transaction to Rs 5,000.
How long would India take to go cashless, considering India has just started to embrace digital transactions seriously?
Only 10 per cent of our day-to-day expenses are electronic. I am talking about 10 per cent in an optimistic way; it can be much lower than this. Most transactions for an average person are in cash. So, making a shift from cash to largely cashless or less cash is quite a task. It is not a month or two month work but more than that. If we continue the pace at which we are going (in the last few weeks), we should reach 50:50 (cashless: cash transactions), by March 2017.
Are you ready to cope up with the escalation in transactions?
Yes, we have a capacity of 40 million transactions per day. At present, we are using 15 million, although we process about 25 million per day on an average. We have two systems – offline and online system. Our online capacity is 40 million and offline is 60 million. At this point of time, this capacity is good enough. We will upgrade the system as and when required. Currently, we are working towards making this 100 million in year’s time for online transactions.
Do we see NPCI expanding in time to come?
We are already 1,000 plus company in terms of manpower. We have around 800 people in our own organisations. We have got 300 people in the outsourcing company. We might need 300-400 people more, with digitisation, upgradation of various services and introduction of more products.