Post demonetization, digital payment transactions witnessed tremendous growth and Unified Payment Interface (UPI) launched by National Payment Corporation of India (NPCI) has been well accepted. Government of India's Digital India mission comprises online payment platforms and services to reach remote areas of the country. However, its reach and acceptability continue to face challenges, particularly, in smaller towns. The Central Bank of the country had envisaged point-of-sale (PoS) machines to touch 50 lakh mark by 2021, but that figure is already overtaken by March 2020 when number of active PoS machines deployed reached 51.4 lakh. As pointed out, the awareness and adoption of digital transactions is on rise yet there is a need to strengthen digital infrastructure to ensure consistency in reach and penetration across smaller towns including rural areas.
Challenges
The need of the hour is to make available simple and cost-effective payment acceptance tools to small and medium enterprises (SME), shopkeepers - in the smaller centres which are under-served. At majority of smaller centres, it is difficult for the merchants to provide multiple payment options viz. UPI, PayTm, PhonePe, Google Pay, Amazon Pay, e-wallets, etc. to the consumers. There exists an ample opportunity for the products to be marketed for which merchants need to be enabled to accept payments through credit and debit cards. Though the banks across country have issued almost 100 crore credit and debit cards yet the number of PoS terminals is not commensurate.
Another challenge encountered by merchants is in the form of initial investment for devices and the recurring cost associated with acceptance, which can be tackled by providing low-cost devices. The digital payment acceptance could be enhanced by facilitating seamless on-boarding process for merchants and educating them as well as consumers about the salient features of digital ecosystem, and risks associated with it. Extending EMI options on debit cards would enable merchants to offer affordable solutions to consumers. Since a small section of the populace has access to formal loans, EMI on debit cards is going to be a game changer that would encourage consumers to migrate to digital platforms.
Objective of PIDF Fund
The idea of setting a PIDF was initially mooted in March 2016, when Central Bank came out with a concept paper aiming to enhance card acceptance infrastructure in the country. The Central Bank announced setting up of PIDF with seed capital of Rs 500 crore, half of which would be contributed by the Central Bank and the rest would come from card issuing banks and card network companies. The operational expenses would be borne by the card issuing banks and card network companies, and shortfall, if any, would be made good by the Central Bank.
The purpose of PIDF is to encouraging adoption of PoS infrastructure, both physical and digital, in tier-3 to tier-6 towns and north-eastern states. The entire premise of setting up this fund is to make it simpler for small merchants to accept digital payments across the country. This fund is also likely to subsidize the cost of PoS machines and thin margins on which these payment companies operate in certain areas where adoption and usage of digital payment is poor. This initiative will make the economics affordable and is likely to increase the merchant base accepting digital payments significantly. This would aid banks in speedier acquisition of small merchants and enhance penetration in both existing as well as new markets.
Please keep watching this space for more updates on payment solutions!
Comments