India’s payments network the National Payments Corporation of India (NCPI) is looking to use blockchain technology to make digital payments more robust and efficient, according to a report.
It plans to develop a resilient, real-time, and highly scalable blockchain solution for digital payments, which have grown exponentially over the last few years. It is proposed to develop this solution using an open-source technology framework.
NPCI has also floated an Express of Interest (EOI) to help bidders propose their capabilities to develop distributed ledger technology or blockchain in the payment domain.
The report said that blockchain will reduce dependency on a central engine operating the payment infrastructure. Also, the immutable database promises more efficiency and security, which will reduce frauds. Blockchain technology stores information about transactions between users in a way that can be tracked by any user at any time, which ensures maximum transparency.
Over the last decade, NPCI has been operating several retail payment and settlement systems in India, including, among others, National Automated Clearing House (NACH), Aadhaar-Enabled Payment System (AePS), Unified Payments Interface (UPI), Bharat Interface for Money (BHIM), and National Electronic Toll Collection (NETC).
It recently announced a partnership with the Discover Network to help Indian card payment system RuPay to expand its footprint globally and be used at international locations.
According to industry experts, India could be one of the world’s blockchain leaders by 2023.
NCPI has noted that problems such as a lack of acceptance by merchants and lower penetration of smartphones in India are hindering the digital payments ecosystem but are likely to be gradually resolved over the next few years. Currently, only around five million merchants across the country are equipped to accept digital payments.
Therefore, with a view to encourage digitisation of payments and enhance financial inclusion through digitisation, the RBI has decided to constitute a high-level committee on “deepening of digital payments”.
Under the committee, members will review the existing status of digital payments in the country, identify the current gaps in the ecosystem, and develop solutions to bridge them. Also, they will assess the current levels of digital payments in financial inclusion and carry out cross-country analyses to identify methods to accelerate digitisation.
In the international context of digital payments, India was ranked to have the most evolved system compared to 25 other countries which were surveyed by a US-based banking technology agency. This included the UK, China, and Japan. The parameters it used to measure the digital payments in these 25 countries include round-the-clock availability of the services, adoption, and immediacy of payments.
As reported earlier, the Indian digital payments industry is estimated to reach US $500 billion by 2020, which will account for 15% of the country’s GDP and non-cash payment methods, including cheques, net-banking, credit and debit cards, mobile wallets and UPI, will double to 40%.