Launching the BharatQR mobile payments acceptance system here on Monday, RBI Deputy Governor R. Gandhi said granting licences to payment service providers cannot be an automatic “tick box exercise” and such entities need to be selected as per proper selection criteria.
“There is an implied suggestion that this (payment) sector needs to be freed of licensing mechanism and once a set of criteria are fixed, any number of entities meeting those criteria should be allowed to function. We differ from this idea,” Gandhi said launching the payments solution developed as per directions given by the Reserve Bank of India.
“Such a free entry may not be appropriate for payment industry. We must remember that the payment service provider is entrusted with money and therefore fit and proper criterion is of utmost importance and consequently, free entry based on tick box exercise will not be right and it can pose a risky proposition to the system as a whole,” he said.
“When you keep the money of the public in ‘account’, you are a financial entity taking deposits and you must be public trustworthy and so be regulated as a deposit taking financial entity,” he added.
Citing the examples of Prepaid Payment Instrument (PPI) issuers, Bharat Bill Payment System (BBPS) operating units, Trade Receivables Discounting System (TReDS), White Label ATMs (WLAs) and other payment aggregators, Gandhi said there is a misconception that non-bank entities are being discriminated as compared to the banking entities in the payment system arena.
“We have been opening up the space and allowing entry to non-bank entities. At the origination, in between originating bank and destination bank and at the receiving end, there is no restriction for a non-bank entity to be present,” he said.
Referring to criticism over RBI not allowing non-bank entities to keep bank accounts in a situation of mobile phone companies wanting to offer “account” based payment services, Gandhi said: “Our answer is simple. If you maintain an account, then you are a bank and you need a banking licence.”
BharatQR is an inter-operable and low cost payment acceptance solution, developed by National Payments Corporation of India (NPCI), Mastercard and Visa.
With this new digital payments solution, consumers will not need to scan different quick response (QR) codes at the same merchant provided by the different payment networks. The merchants will only need to display one QR code at the storefront or through the acquiring bank’s mobile application.