RBI’s extension of PIDF scheme to include soundbox devices and QR codes has been received well by fintech players, with many believing it be a step in the right direction to promote financial inclusion and digital transactions
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has proposed the extension of the Payments Infrastructure Development Fund (PIDF) Scheme for two more years up to December 31, 2025.
While announcing the monetary policy statement today, RBI governor Shaktikanta Das said that the PIDF scheme had enabled over 2.66 crore new payment touchpoints in India since its launch. "The scheme's coverage is also being expanded to include the beneficiaries of the PM Vishwakarma Scheme in all centres," he said. Das also added that the measures would accelerate RBI's efforts to promote digital payments at the grassroots level.
The central bank introduced the PIDF Scheme in January 2021 for three years with an intent to subsidise the deployment of payment acceptance infrastructure in tier-3 to tier-6 centres. It was primarily focused on the Northeastern states where it wanted to improve financial inclusion.
Das also said RBI received encouraging feedback from the industry about deploying emerging payment acceptance modes, like soundbox devices and Aadhaar Enabled Payment System (AEPS). Its deployment will accelerate the development of payment acceptance infrastructure in rural parts of the country. This, in turn, will further uplift the indigenous artisan communities and bring them into the digital fold. The move has been received well by fintech players.
Rahul Tandon, chief product officer at Safexpay, states that the apex bank's extension of the PIDF Scheme to include soundbox devices and QR codes aligns with India's digital initiative, which includes promotion of financial inclusion and digital transactions at the grassroots. He believes this initiative will instil confidence among AEPS users, empowering a diverse spectrum of small and mid-sized businesses.
According to NPCI data, AEPS transactions value surged to 29,471 crore value in July 2023. "Overcoming the barriers of accessibility and availability in financial services is pivotal for promoting inclusion across the length and breadth of the country," notes Dilip Modi, founder of Spice Money.
He adds that the recent monetary policy announcements by the RBI, particularly the extension of the PIDF Scheme and the emphasis on advancing emerging payment methods like soundbox devices and AePS, highlight that the government recognises the role that fintechs play as transformative agents in the financial landscape of emerging India.
"Spice Money has been addressing the challenge by extending digital payment and financial services by empowering rural nanopreneurs and kirana store owners. Leveraging our Adhikari network of 12.7 lakh nanopreneurs, we continuously support this mission, aligning with RBI's efforts to facilitate digital payments nationwide," Modi claims.
Digital payments have taken the front seat in various sectors of B2B and B2C payments due to convenience and accessibility. The proposed introduction of Card on File (CoF) token creation at issuer banks will strengthen security and foster trust for cardholders, potentially boosting e-commerce or online transactions using cards.
Tandon urged payment-tech providers to accommodate these tokenised transactions while ensuring security and compliance. "This has the potential to reshape the industry's competitive landscape and foster collaboration between providers and issuers for a seamless CoF tokenisation experience, thereby creating new revenue and engagement opportunities," he points out.
The RBI has also the expanded master direction on the internal ombudsman mechanism framework to include other regulated entities (REs), including specific non-bank system participants (entities that are not banks but issue prepaid payment instruments), designated non-banking financial companies, and all credit information companies.
Due to this, merchants can experience more streamlined and efficient grievance resolution processes when dealing with customer complaints related to digital payments. Additionally, customers can expect fairer and more effective dispute resolution mechanisms, which could enhance their trust in digital payment platforms.
Anand Kumar Bajaj, founder and CEO of PayNearby, also commends the establishment of the 'Omnibus SRO' framework by the RBI. Das had said in his statement that the central bank has decided to issue the framework for recognising self-regulatory organisations (SROs) for REs.
"This initiative will create a robust regulatory space, encouraging industry players to adopt global best practices. It will enable the regulator to balance innovation, risk mitigation, and consumer protection, setting ethical benchmarks that inspire confidence in both investors and consumers," he claims.
The PDIF’s extension, coupled with the inclusion of beneficiaries from the PM Vishwakarma Scheme, reflects a much-needed step towards promoting digital transactions at the grassroots level. It not only empowers merchants who lack payment acceptance devices but also enhances the economic conditions of artisans, enabling them to secure a better livelihood for themselves and their families.