Wallets, payment banks have been unshackled but they must ensure data security
At the recently concluded Monetary Policy Committee meeting, the Reserve Bank decided to allow prepaid payment instruments to enter into a range of quasi-banking functions. This will give a further impetus to achieving financial inclusion goals. Notwithstanding the recent steps to expand access to banking services, there have been hurdles in the usage of services offered by fintech players and prepaid payment instruments like wallets. For instance, after the RBI released its Master Directions in October 2017, digital wallets were to become interoperable within six months. Three years later, they are still functioning in a walled garden approach, thus locking up users to specific platforms. Now, the RBI has made it mandatory for wallets to become interoperable, allowing users to transact irrespective of the platform they are on. This will bring digital wallets at par with credit cards, UPI, and online banking accounts.
The RBI has also allowed payment system operators to take direct membership in real-time gross settlement (RTGS) and national electronic funds transfer (NEFT), hitherto available only to customers of traditional banks. Through these measures, RBI has opened up a huge market for fintech players; at the same time wallet, payments banks, and other payment systems can offer a range of services. However, the real impact would be seen only if these players utilise the new tools for providing financial services to the unbanked.
It is clear that the financial inclusion objectives cannot be met by banks alone. Fintech players, with their innovative thinking and faster adoption of technology, must be encouraged. On their part, payment companies must invest in robust systems to make online transactions secure. Consumers must be protected from data breaches and network outages if the regulatory boost to fintech is to have to wide-ranging impact.