The Reserve Bank of India (RBI) on May 15 released its latest vision statement that lays the foundation for the country's payment and settlement ecosystem by emphasising on innovation, cybersecurity, and customer protection.
The RBI's Payment And Settlement Systems In India: Vision – 2019-2021, aims to transform India into a cash-lite economy and ensure that the country has a ‘state-of-the-art’ payment and settlement systems that are safe and secure. Though it has laid out strong policy measures regarding cybersecurity, the regulatory body has also urged the financial institutions to employ emerging technologies like artificial intelligence and machine learning to evaluate risk emerging from innovative payment channels.
While the Payment Systems Vision 2018 of the Reserve Bank was successful in reducing the cash-dependency, thus boosting electronic-payment systems and led to introduction to new products like Unified Payments Interface (UPI) and Bharat QR (BQR), the new vision hopes to push India into a cashless and cardless society by ensuring increased efficiency, uninterrupted availability of safe, secure, accessible and affordable payment systems.
The RBI’s decision to lay its key focus on cybersecurity is pertinent now as the country has witnessed accelerated use of Aadhar in payment systems, thus increasing the susceptibility of citizens and financial institutions to possible cyber attacks.
During the said period, digital transaction in the country is likely to increase by four times from ₹2069 crore in December 2018 to ₹8707 crore in December 2021. The RBI also stated that by 2021, India will see a 100 per cent annual growth rate for payment systems like UPI and IMPS, while 40 per cent for NEFT.
Owing to the forecasted boom in the country’s payment and settlement ecosystem, RBI has issued a clear mandate revolving security, sating that it is pivotal for risk management. The new vision draft by espouses several risk-focussed measures for the financials bodies to comply, those include:
Proportionate Oversight for maintaining the integrity of payment systems
In order to ensure that all major financial institutions have a comprehensive cyber-security measure, RBI has stated that the stakeholders in the industry will be periodically subjected to safety audits.
“For transparency and clarity, there is a need for a disclosed supervisory framework for all stakeholders to better understand their roles and responsibilities. The need for publishing oversight reports in the public domain by the Reserve Bank would be considered. The oversight framework for Professional Services Organisation (PSOs) would also include data reporting and analytics requirements for PSOs,” it said.
Third Party Risk Management and System-Wide Security
RBI stated that a separate regulatory framework for outsourcing arrangements by non-bank payment services will be examined by the body. This would entail constituting a framework that will look into risks associated with data access, confidentiality, integrity, sovereignty, recoverability, regulatory compliance and auditing.
It will also take into consideration the overall security of the digital payments ecosystem by covering the entire payment transaction chain, including the need for establishing endpoint security.
Framework For Collecting Data On Frauds In Payment Systems
By monitoring the different kinds of frauds, the agency aims to strengthen the payment system and minimise the instances of frauds. This would be achieved by analysing fraud related data for payment systems to differentiate between fraudulent and legitimate transactions; oversight and supervision, and also for providing guidelines to entities for minimising risks of similar frauds.
“The fraud data will be used to influence regulatory decisions and for reducing the incidence and level of fraud in the payments ecospace,” it said.
Drafting A Framework For Testing Resilience Of Payment Systems
The availability of multiple modes of payments has increased the need for robustness and resilience for the existing payment methods, hence RBI has stated that a framework to enable these systems to continue in case of a failure and facilitating switching t0 another payment system will be constituted.
Benchmarking India’s Payment Systems
For this, the RBI will conduct an exercise which will aim at benchmarking India’s payment systems and understand India’s India’s standing against major countries across all payment systems and payment instruments, by doing so, it hopes to improve existing payment system and reduce friction.
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Akshaya Asokan works as a Technology Journalist at Analytics India Magazine. She has previously worked with IDG Media and The New Indian Express. When not writing, she can be seen either reading or staring at a flower.