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PwC 1
Module 4:Digital Payments
PwC 2
An overview of digital payment mechanisms 1
1.1 Digital Payments
Payment
Cash Non-Cash
DigitalNon-
Digital
As per “The Payment and Settlement Act, 2007”, Digital
Payments are defined as any “electronic funds transfer”
means any transfer of funds which is initiated by a person by
way of instruction, authorization or order to a bank to debit or
credit an account maintained with that bank through
electronic means and includes point of sale transfers, ATM
transactions, direct deposits and withdrawals, transfers
initiated by telephone, internet and card payments.
Payments is a broad term used for exchange of money for
value. Exchange of money can be done via cash or non-cash
instruments such as cards, mobile wallets, internet banking etc.
One of the methods of transacting with non-cash instruments
is digital payments.
Digital Payments:
Payments:
Source: NITI Ayog
1.2 Digital Payments Benefits
Benefits
Anytime
Anywhere
No fear of
losing cash or
getting
robbed
No need to
handle cash
Safe &
Secure
Transactions
Incentive,
Cashback,
Offers
Convenience
of use
Secured
payment
infrastructure
Seamless
customer
experience
Emergence of
non-traditional
players
India going
digital
Favorable
regulatory
interventions
Key Growth Drivers
• India has multiple payments and settlement systems, both gross and net settlement systems.
• Gross Settlement: Settlement of funds transfer instructions occurs individually (on an instruction by instruction basis).
• Net Settlement: It refers to the resolution of all of a bank's transactions at the end of the day.
• The Indian banking sector has been growing successfully, innovating and trying to adopt and implement electronic payments to enhance the banking system.
• Ever since the introduction of e-payments in India, the banking sector has witnessed growth like never before.
• The ratio of e-payments to paper
based transactions has increased considerably, which is as a result of advances in technology and increasing consumer awareness of the ease and efficiency of internet and mobile transactions.
1.3 Growth in Digital Payments
Payment and settlement systems in India covered by the Payment and Settlement Systems Act, 2007 (PSS Act) are regulated by
the Reserve Bank of India (RBI) and the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS)
1.4a Role of players in digital payments ecosystem
A payment system consists of a set of instruments, banking procedures and guidelines, service providers and processors that ensure the circulation of money in an economy. The roles of Payer are mentioned below-
Pa
ye
e
Pa
ye
r
Issuers
Payment software providers
ATM / POS manufacturers
Delivery channels
Payment network/
Card associations
Paymentservice
providers
Merchant Acquirer
Application service
provider
Payment processors
Mobile network
operators
Payments regulator /
central hubs
Acquiring banks
Modes like Cash, Cheque, ATM/POS, Cards, Bank branches which enable the customer to make or
receive payments
Delivery Channels
These companies are responsible for setting up and maintaining the payments acceptance infrastructure
ATM / POS manufacturers
Software companies that develop and supply payments management solutions to other players in the value
chain
Payment software providers
1.4b Role of players in digital payments ecosystem
A payment system consists of a set of instruments, banking procedures and guidelines, service providers and processors that ensure the circulation of money in an economy. The roles of Payer are mentioned below-
Pa
ye
e
Pa
ye
r
Issuers
Payment software providers
ATM / POS manufacturers
Delivery channels
Payment network/
Card associations
Paymentservice
providers
Merchant Acquirer
Application service
provider
Payment processors
Mobile network
operators
Payments regulator /
central hubs
Acquiring banks
The issuer is the party that provides the cardholder with the payment product. They bear the responsibility of approving the cardholder and billing and collecting the owed funds.
Issuers
Associations govern the policies pertaining to their cards, monitor processing activity, and oversee the clearing and
settlement of transactions
Payment network / Card associations
Companies authorised by the central bank to offer payments related services to the customers
Payment service providers
1.4c Role of players in digital payments ecosystem
A payment system consists of a set of instruments, banking procedures and guidelines, service providers and processors that ensure the circulation of money in an economy. The roles of Payee are mentioned below-
They maintain the merchant’s bank account and pass the merchant’s transactions along to the applicable issuing banks to receive payment.
Acquiring banks
Statutory bodies like NPCI (in India) to help monitor and regulate the activities of payments players
Payments regulator / Central hubs
Telecom network service providers that enable payments through mobile phones
Mobile network operators
Pa
ye
e
Pa
ye
r
Issuers
Payment software providers
ATM / POS manufacturers
Delivery channels
Payment network/
Card associations
Paymentservice
providers
Merchant Acquirer
Application service
provider
Payment processors
Mobile network
operators
Payments regulator /
central hubs
Acquiring banks
Pa
ye
e
Pa
ye
r
Issuers
Payment software providers
ATM / POS manufacturers
Delivery channels
Payment network/
Card associations
Paymentservice
providers
Merchant Acquirer
Application service
provider
Payment processors
Mobile network
operators
Payments regulator /
central hubs
Acquiring banks
1.4d Role of players in digital payments ecosystem
A payment system consists of a set of instruments, banking procedures and guidelines, service providers and processors that ensure the circulation of money in an economy. The roles of Payee are mentioned below-
A company appointed by a merchant to handle transactions from various channels such as credit
cards and debit cards for merchant acquiring banks
Payment processors
They are a way for companies to outsource their technology needs. A third party distributes services
from a central data center
Application service provider
The acquirer provides technology and hardware, which enables the merchant to process the
transaction
Merchant acquirer
1.5a Emergence of Payment Mechanisms in India
Payments services developed over the years
2011
2010
Aadhaar Enabled
Payment System (AePS)
2011
Immediate Payment
Service (IMPS)
Cheque Truncation
System (CTS)
2012
RuPay
2012
National Automated
Clearing House (NACH)
*99#
2014
2016
Unified Payments
Interface (UPI)
Bharat Bill Payment
System (BBPS)
2016
2016
National Electronic
Toll Collection (NETC)
Bharat Interface
for Money (BHIM)
2016
2017
Bharat QR
The way people make payments is changing faster than any area of financial services, and is affecting
various fields in Banking/ Fintech Industry.
Understanding the trends in payments is important for any commercial or payments bank wanting to serve
the complete financial needs of consumers. Payments today is one of the most happening areas in terms
of innovation, technology and business.
1.6 Payment Mechanisms
CardsIn India, debit card was
first launched in 1987
NetbankingIn India, it was
introduced in 1996, by
ICICI bank
Mobile BankingIn India, mobile banking
was started in 2002 as
SMS banking
BharatQRIt achieves
interoperability among
QR codes of different
networks
Prepaid InstrumentsAgainst the value
stored in such an
instrument, one can
make payments
Mobile WalletsIt facilitates payments
using a digital device at
stores, on the web or in
apps
Interoperability : A customer of any bank is now able to pay with an app with the Bharat QR feature using their credit, debit or prepaid cards.
1.6a Payment Mechanisms - Cards
Use Now, Pay LaterA credit card is a card that allows you to use funds against a line of credit. It facilitates access to funds for an interest free period which could range from 20 to 50 days subject to the scheme applicable on the specific Credit Card.
Pay Now, Use LaterPrepaid card is a Payment Card that is preloaded with money by you or someone else. Prepaid Cards are issued by a Bank or a non-Bank institution and you can buy goods and avail services with the funds available in your Prepaid card.
Use Now, Pay NowDebit cards are
linked to your Bank account and money is debited from your Bank account as soon as the transaction is occurred using your Debit Card. You can only spend the money available in your Bank account.
There are three types of cards system exist in India
Debit Cards Credit Cards Prepaid Cards
POS machine is a device provided by a bank to a merchant which
can be used to make payment using a card
These cards can be
accepted at
• Point of Sale(PoS)
Machines
• Online transactions
• Mobile
• Micro-ATM
1.6a Payment Mechanisms - Cards
Understanding card based transaction flow
Card network obtains
authorization from the
issuing bank
Issuing bank validates the
credit card number, checks
available funds, and
validates the CVV number
and authenticates
Issuers accepts or decline
the transaction, card
network relays the
message back to acquirer
Acquirer sends the
response to POS
Receipt is
generated &
given to the
customer
Cardholder swipes card at POS
at merchant outlet / makes
online payment
Acquiring bank sends the
details to card network
(MasterCard/VISA/Rupay)
Understanding Netbanking transaction flow
User selects the
Netbanking payment
mode option and
selects the User’s Bank
to initiate the payment
User is taken to the User’s
Bank official Netbanking site
where he/she has to login
using credentials shared by
that bank earlier
After successful login, the
user authenticate the
payment using OTP sent to
the user’s registered
mobile/email
User inputs the OTP
and authenticate
the payment. User is
then taken to that e-
commerce site
Success
receipt is
generated &
shown to the
user
User can visit any e-commerce
site and buy any service/goods
E-commerce site will ask the
user the method of payment
mode. Typically by
Netbanking, Cards, UPI etc
1.6b Payment Mechanisms - Netbanking
Netbanking/Online Banking is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the
financial institution's website. It allows individuals to carry out most of the transactions that you
would have otherwise done by visiting a bank branch.
Understanding Mobile banking transaction flow
After successful login,
user can see the list of
payment modes like
Fund transfer,
Scan&Pay etc
User can choose any mode
of payment/fund transfer
The user authenticate the
payment /fund transafer
using OTP sent to the user’s
registered mobile/email
User inputs the OTP
and authenticate
the payment.
Success
receipt is
generated &
shown to the
user
User needs to download user’s
Bank Mobile Banking application
on his/her smartphone
User clicks on the app and
he/she has to login using
credentials shared by that
bank earlier
1.6c Payment Mechanisms – Mobile banking
Mobile banking is typically a banking app which can be downloaded from the playstore and logged in with the help of customer id and a secure password. It is just the thing you need
when you are on the move. In the absence of a laptop/computer, your mobile app is the
answer to all your banking needs.
Understanding BharatQR transaction flow
Enter the purchase
amount after scanning
the QR code or the
Amount is directly
reflected onto
the mobile
screen
User checks the Merchant
details reflected onto the
user’s smartphone and clicks
on pay
The user authenticate the
payment using OTP sent to
the user’s registered
mobile/email
User inputs the OTP
and authenticate
the payment.
Merchant
directly
receives the
amount in
his/her bank
account
User needs to download user’s
Bank Mobile Banking application
on his/her smartphone which
supports BhartQR
User scans the QR code at
merchant location
1.6d Payment Mechanisms – BharatQR
Four payment networks operating in India – Visa, Mastercard, American Express and National
Payments Corporation of India(NPCI) have collaborated to develop Bharat QR. The genesis of
this strategic initiative is based to drive interoperability among QR based payment products of
different networks.
1.6e Prepaid Instruments (PPIs)
PPIs are payment instruments that facilitate purchase of goods and services, including financial services, remittance facilities, etc. against the value stored on such instruments. PPIs that can be issued in the country are classified under three following types
• These PPIs are issued by an entity for facilitating the purchase of goods and services from that entity only and do not permit cash withdrawal.
• As these instruments cannot be used for payments or settlement for third party services, the issuance and operation of such instruments is not classified as payment systems requiring approval / authorization by the RBI.
Closed
System PPIs
01
• These PPIs are used for purchase of goods and services, including financial services, remittance facilities, etc., at a group of clearly identified merchant locations / establishments which have a specific contract with the issuer (or contract through a payment aggregator / payment gateway) to accept the PPIs as payment instruments. These instruments do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banks.
Semi-closed
System PPIs
02
• These PPIs are issued only by banks and are used at any merchant for purchase of goods and services, including financial services, remittance facilities, etc. Banks issuing such PPIs shall also facilitate cash withdrawal at ATMs / Point of Sale (PoS) / Business Correspondents (BCs).
Open
System PPIs
03
Mobile prepaid cards
PayTm wallet
Vodafone mPesa
Examples
1.6f Mobile Wallets
Benefits:
1 2
Easy accessibility
Simple to load money
A mobile wallet is a way to carry your credit and debit card information in a secure digital form on your mobile device. Instead of using your physical plastic card to make purchases, a
mobile wallet allows you to pay with your smartphone, tablet, or smartwatch in stores, in apps,
or on the web. Popular wallets in India are PayTM, Mobikwik, SBI Buddy, HDFC Payzapp, ICICI
Pockets etc.
Using a mobile wallet for day to day transactions is really simple to begin with. Downloading the app and creating a user ID and password. It is as simple as logging in to your Gmail or Facebook account from your smart phone.
You can add money to your wallet in easily via netbanking, credit card or debit card. Being able to store these details saves you from the hassle of entering these details every time you make a transaction and saves time.
1.7a Other Banking Services
CTS (Cheque Truncation System)
CTS or online image-based
cheque clearing system is a
cheque clearing system
undertaken by the Reserve
Bank of India (RBI) for faster
clearing of cheques.
Clearing house is a bankers' establishment where checks and bills from
member banks are exchanged, so that only the balances need be
paid in cash.
Cheque presented in
bank by Beneficiary
user
Cheque presented in
bank by Beneficiary
user
Cheque presented in
bank by Beneficiary
user
Cheque presented in
bank by Beneficiary
user
1 2
4 3
1.7b Other Banking Services
Premium amounts are
debited from the user’s
account as per the
frequency mentioned
in the mandate
Insurance company will
share the NACH
mandate to their bank
which scans and send
to NPCI for processing
NPCI sends the NACH
mandate details with
user bank for validation.
User Bank accepts and
sets auto-debit feature
as per the mandate
User Submits NACH
request for auto debit
for services e.g.
insurance
1 2
4 3
NACH
National Automated Clearing
House, or NACH, is a centralized
clearing service that aims at
providing interbank high
volume, low value transactions
that are repetitive and periodic
in nature.
1.7c Other Banking Services
User Dial *99# with
registered number and
gets options
User selects the options
which he/she wants to
avail to complete the
transaction. For Fund
transfer, the charges
are ₹ 1.50/ transaction
User selects option
from: Send Money,
Request Money, Check
balance, My profile,
Pending request,
Transactions, UPI PIN
User enters the serial
number for the option
he/she wants to use &
hit send/call button.
User will see some more
options on the screen
1 2
4 3
USSD - *99#
USSD based mobile banking
service of NPCI was initially
launched in November.
Understanding the importance
of mobile banking in financial
inclusion in general and of *99#
in particular, various
regulatory/trade bodies came
together to ensure on boarding
of all TSPs on *99# (USSD 1.0).
With USSD, the user does not require a smartphone or access to the Internet, any mobile phone can be used.
1.8a New modes of Digital Payments – Unified Payments Interface
Raise
complaint
from mobile
app directly
Single click
authentication
Use of virtual ID
is more secure
and no
credential
sharing
Single
application for
accessing
different bank
accounts
Round the
clock
availability
Benefits for end customers
Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless
fund transfer & merchant payments at one place. It also caters to the “Peer to Peer” collect
request which can be scheduled and paid as per requirement and convenience.
Understanding BHIM transaction flow
User checks the Merchant
details reflected onto the
user’s smartphone and
clicks on pay
The User proceeds to the
Enter UPI Pin Screen and
enters the UPI PIN
Users UPI PIN
authenticates the
transaction.
Merchant and User
both receive an SMS
confirming the
transaction.
User opens BHIM app or any Bank
app which is BHIM enabled
User scans the QR code at merchant
location. Enter the purchase amount
after scanning the QR code or the
Amount is directly reflected onto the
mobile screen
1.8b New modes of Digital Payments – Bharat Interface for Money
Bharat Interface for Money (BHIM) is a payment app that lets you make simple, easy and quick payment transactions using Unified Payments Interface (UPI). You can make instant bank-to-
bank payments and Pay and Collect money using just Mobile number or Virtual Payment
Address (UPI ID) by using Scan & Pay feature.
Understanding IMPS transaction flow
User enters MPin to
validate the fund transfer.
User Account is debited
instantly
Fund transaction details are
shared with NPCI to identify
the beneficiary bank
Details are shared
with Beneficiary
bank to credit the
beneficiary account
number. And the
success response is
shared with NPCI
and then to user
bank to complete
the transactionUser opens Bank application to
transfer funds using IMPS
payment mode
After successful login, the user selects
Fund transfer feature. User enters
beneficiary account number with
IFSC code.
1.8c New modes of Digital Payments – Immediate Payment Service
Immediate Payments Service (IMPS) is an instant payment inter-bank electronic funds transfer system in India. IMPS offers an inter-bank electronic fund transfer service through mobile
phones. Unlike NEFT and RTGS, the service is available 24/7 throughout the year including bank
holidays.
1.8c New modes of Digital Payments – Immediate Payment Service
Using Mobile number & MMID (P2P): Mobile Money Identifier is a 7 digit number, issued by banks. MMID is one of the input which when clubbed with mobile number facilitates fund transfer. Combination of Mobile no. & MMID is uniquely linked with an Account number and helps in identifying the beneficiary details. Different MMID’s can be linked to same
Mobile Number. (Please contact your bank for getting the MMID issued)
Using Aadhaar number (ABRS)
Using Account number & IFS Code (P2A)
Fund transfer can be done through 3 options:
1
2
3
Choose the type of
transaction you want
to make
Provide verification through
fingerprint / iris scan
Collect your receipt
Go to a micro ATM or banking
correspondent
Provide Aadhaar number and bank
name
1.8d New modes of Digital Payments – Aadhaar Enabled Payment System
Aadhaar Enabled Payment System (AEPS) is a type of payment system that is based on the Unique Identification Number and allows Aadhaar card holders to seamlessly make financial transactions
through Aadhaar-based authentication. The AEPS system aims to empower all sections of the society
by making financial and banking services available to all through Aadhaar. With AePS you can
transfer funds, make payments, deposit cash, make withdrawals, make bank balance enquiry, etc.
Understanding AePS transaction flow
1.8d New modes of Digital Payments – Aadhaar Enabled Payment System
Select the bank in
which customer is
having an
account
1Bank’s Issuer
Identification
Number (IIN) or
name
2
Aadhaar Number
3
Fingerprint
4
How Does AEPS Work
The AEPS machine works like a Point of Sale (POS) machine. Instead of a debit/credit card pin, the
merchant will have to key in the customer’s Aadhaar number and authenticate the transaction
using the customer’s biometric data.
Information required to carry out an AEPS transaction
Understanding BBPS transaction flow
Bills are fetched from the
biller database and
showed to the user/
customer
User validates & checks the
bill and initiates payment
After successful
payment, the
system will generate
a success receipt
and show it to the
user to complete
the transaction
User uses channel like website/
mobile app/ agent/ retail shops/
BC of Bank/ non-Bank to initiate
bill pay
The bill details are shared with BBPOU
who is connected to the biller
through BBPCU (NPCI), for
confirmation before payment
1.8e New modes of Digital Payments – Bharat Bill Payments System
Bharat Bill Payment System (BBPS) is a one-stop ecosystem for payment of all bills (such as utility bills) providing an interoperable and accessible “Anytime Anywhere” bill payment service to
all customers across India with certainty, reliability and safety of transactions through a network
of agents of registered member as Agent Institutions, enabling multiple payment modes, and
providing instant confirmation of payment.
PwC
Core Payment Systems in India
29
2
Before the due date, bank
intimates to maintain
sufficient balance in the
account for the transaction
On the due date, amount
will be debited from account
Payment is
processed
Provide a mandate for debit (via
Net- banking/Branch)
Indicate the date, amount
2.1 Electronic Clearing Service (ECS)
• ECS is an electronic mode of funds transfer from one bank account to another. It can be used by institutions for makingpayments such as distribution of dividend interest, salary, pension, among others. It can also be used to pay bills and othercharges such as telephone, electricity, water or for making equated monthly installments payments on loans as well as SIPinvestments.
• ECS can be used for both credit and debit purposes.
• Discontinue ECS mandate: In case the services like post- paid mobile connection is discontinued, and the payment shouldbe discontinued from next cycle then you have to inform the bank.
Understanding ECS transaction flow
• Introduced in 2004, Real Time Gross Settlement (RTGS) is a funds transfer mechanism where transfer of
money takes place from one bank to another on a 'real time' and on 'gross' basis.
• Settlement in 'real time' means payment transaction is not subjected to any waiting period. The
transactions are settled as soon as they are processed. This is the fastest possible money transfer
system through the banking channel.
• RTGS is a large value (minimum value of transaction should be INR 2,00,000) funds transfer system
whereby financial intermediaries can settle interbank transfers for their own account as well as for
their customers.
• Fees for RTGS vary from bank to bank. RBI has prescribed upper limit for the fees which can be
charged by all banks both for National Electronic Funds Transfer (NEFT) and RTGS.
RTGS Timings
Time EventRegular Days including Saturdays (Except 2nd and 4th Saturday
of all months)
Open for Business 8:00 AM
Initial Cut-off (Customer Transaction) 4:30 PM
Final Cut-off (Inter Bank Transaction) 7:45 PM
End of the Day 8:00 PM
2.2 Real Time Gross Settlement (RTGS)
Introduced in 2005, the National Electronic Fund Transfer (NEFT) system is a nationwide
system that facilitates individuals, firms and corporates to electronically transfer funds
from any bank branch to any individual, firm or corporate having an account with any
other bank branch in India. It is done via electronic messages
Even though it is not on real time basis like RTGS, hourly batches are run in order to
speed up the transactions. For being part of the NEFT funds transfer network, a bank
branch has to be NEFT enabled. NEFT has gained popularity due to it saving on time and
the ease with which the transactions can be concluded
Certain other unique features like accepting cash for originating transactions, initiating
transfer requests without any minimum or maximum amount limitations, receiving
confirmation of the date / time of credit to the account of the beneficiaries, etc., are
available in the NEFT payment system.
2.3 National Electronic Fund Transfer (NEFT)
PwC
Governing/regulatory bodies in Payments
33
3
3.1 National Payments Corporation of India(NPCI)
National Payments Corporation of India (NPCI)envisages the vision of touching every
Indian with one or the other PAYMENTS SERVICES and to be the best payments
network globally
National Payments Corporation of India is an umbrella organisation for operating
retail payments and settlement systems in India.
NPCI has launched innovative products like NFS (National Financial Switch) , IMPS
(Immediate payments service) .AEPS (Aadhaar Enables Payments Services), CTS
(Cheque clearing system), RuPay (India's own Card), NACH ( National Automated
Clearing House ), APBS, *99# , UPI (Unified Payment interface), Bharat BillPay , NETC
(National Electronic Toll Collection), BHIM (Bharat Interface for Money), Bharat QR,
BHIM Aadhaar.
3.2 Reserve Bank of India
The Reserve Bank of India as the central bank of India has been playing this
developmental role and has taken several initiatives for Safe, Secure, Sound, Efficient, Accessible and Authorized payment systems in the country
Initiatives
Focus on technology-based solutions for the improvement of the payment and settlement system infrastructure, coupled with the introduction of new payment products by taking advantage of the technological advancements in banks
Platforms launched by RBI
ECS , RECS, ECS Debit, EFT, NEFT, RTGS, Prepaid payments instruments (PPIs), mobile banking systems, ATM’s, Point of sale terminals
Initiative under Vision-2018
• Focus on electronic payments
• Decrease in the share of paper – based clearing instruments, increase in registered customer base for mobile banking, significant growth in acceptance infrastructure, accelerated use of Aadhaar in payment system .
Other strategic initiatives
• Focus on responsive regulation, robust infrastructure, effective supervision and customer centricity, guidelines for interoperability
• Focus on Master Direction on Issuance and Operation of Prepaid Payment Instruments
• Guidelines on Tokenisation
NITI Aayog was entrusted with the task of undertaking a campaign to implement
digital payments systems and it has been working on an awareness campaign to
popularize the different modes of digital payment which are currently available viz.
Cards, USSD, digital wallets, Aadhaar Enabled Payment System (AEPS) and Unified
Payment Interface (UPI)
3.3 NITI AYOG
As NITI Aayog is mandated to act for promotion of co-operative federalism and
recognizing the crucial role of State Governments in this endeavor for nation building
NITI Aayog has been carrying forward its mandate in close association with the
States and the respective state administrations.
PwC
Case Studies
37
4
4.1a Smart Cities Mission - Government of India
Smart Cities is an urban renewal and retrofitting program by the Ministry of Urban Development
(MoUD) - Government of India with the mission to develop 100 cities across the country making
them citizen friendly and sustainable
Country India
Total cities selected
99
City’s Role
• It is five-year program
• Financial aid will be given by the central and state government between 2017 - 2022 to the cities
• The execution of projects may be done through joint ventures, subsidiaries, public-private partnership (PPP), turnkey
contracts, etc.
• Center and state government will provide INR 1,000 Crore funding to the company (corporate company created to
implement Smart city Mission), as equal contribution of INR 500 crore each
Goal
Innovation economy• Innovation in industries, clusters,
districts of a city• Knowledge workforce: Education
and employment• Creation of knowledge – intensive
companies
Objective
• Smart Economy
• Smart Governance
• Smart Mobility
• Smart Environment
• Smart Utility/Services
• Smart Living
Payment transformation
Urban
infrastructure• Transport• Energy/ Utilities• Protection of the
environment/ Safety
Governance• Administration service of
the citizen• Participatory and direct
democracy• Service to the citizen:
Quality of life
4.1b Smart Cities Mission - Government of India
Smart Cities are assisted by standardization of internal processes and policies across departments, payment channels and instruments to provide consistent user experience to the citizens across various service
City Wide Network and
Smart Poles
City Surveillance
City Portal and Mobile Applications
Environment Measurement Display Systems
Enablement of Online Payment modes
Smart Water Meter and Smart Water
Distribution Systems
City & Municipal GIS
System
Municipal Corporation Revamp
City Command Centre
Smart Cities
Mission
Smart Mobility (Intelligent Traffic
& Transit Management System and
Automatic Fare Collection)
Major initiatives taken under the Smart Cities mission by Municipal Corporations are :
4.2a Smart Cities Mission - National Electronic Toll Collection
National Electronic Toll Collection (NETC)
• National Electronic Toll Collection (NETC) provides an electronic payment facility to customer to make the payments at national, state and city toll plazas by identifying the vehicle uniquely through a FASTag.
• NETC offers an interoperable four party nationwide toll payment solution including clearing house services for settlement and dispute management.
• Interoperability, as it applies to National Electronic Toll Collection (NETC) system, encompasses a common set of processes, business rules and technical specifications which enable a customer to use their FASTag as payment mode on any of the toll plazas irrespective of who has acquired the toll plaza.
FASTag
• FASTag is a device that employs Radio Frequency Identification (RFID) technology for making toll payments directly while the vehicle is in motion. FASTag (RFID Tag) is affixed on the windscreen of the vehicle and enables a customer to make the toll payments directly from the account linked to FASTag. FASTag offers the convenience of cashless payment along with benefits like - savings on fuel and time as the customer does not has to stop at the toll plaza
• Currently the NETC Services are live on 428+ toll plazas across the country at National Highway.
4.2b Smart Cities Mission - National Electronic Toll Collection
Some of the key features and functionalities of National Electronic Toll Collection system
Transaction TypeOff-line; near real time transaction processing as the toll plazas send the transactions within 10 mins interval.
Interoperability
NETC ecosystem supports multiple issuers and multiple acquirers' i.e. Tag issued by any member bank is accepted at all toll plaza (under NETC program) acquired by any member bank in a safe and secured manner.
Flexibility to choose the underlying payment instruments
Customers can link their FASTag to their existing savings/current account or to a prepaid account basis the offering from the Issuer member banks. For opening a prepaid account it is not mandatory to have an existing relationship with the issuer bank.
Tag Issuance Can be issued by member banks, authorized for NETC Program.
Cashless PaymentFASTag facilitates electronic payments at the toll plaza while the vehicle is in motion.
Save Time and Fuel
Customer can travel without stopping at the toll plaza by using the FASTag thus reduce congestion at plazas and , saving fuel and reduce travel time.
Recharge FASTagaccount online
Customer can recharge FASTag account online through issuing member banks portal using UPI/ Credit Card/ Debit Card/ NEFT/ RTGS /Netbanking.
CashbackCashback scheme is available to the customers on toll payments using FASTagat National Highways Toll Plazas. The cashback scheme for the current FY is 5%.*
4.2b Smart Cities Mission - National Electronic Toll Collection
Some of the key features and functionalities of National Electronic Toll Collection system
4.2c Smart Cities Mission - National Electronic Toll Collection
Business Models
Issuer
A robust distribution network has been critical to tag issuance business for major banks such as SBI and ICICI bank
• NPCI pays commission of 1.5% per transaction to issuer bank
• Currently, NPCI is incentivizing customers with cashback of 5% per transaction
Acquirer
NPCI has allocated 60-70 NH toll plazas to each participating member bank
• Higher volumes, moderate infrastructure cost and highly dependent on Toll Plaza operators
• NPCI pays commission of 1.25% per transaction to issuer bank
Issuer and Acquirer led
• Banks such as SBI and ICICI have built a strong tag distribution network and are leveraging on the existing infrastructure customers
• Both On-Us and Off-Us transactions are honored by NPCI and therefore, banks with issuer and acquirer led model receive a total
commission of 2.75 % per On-Us transaction
AcquirerToll Plaza Issuer
12
Customer NPCI
3 4
567
NETC Transaction flow
Business operating models in the NETC scheme
In an On-Us transaction, the issuer and the acquirer bank are the same,
where as in an Off-us transaction, they are different
PwC 44
Summary5
5.1 Summary
• Digital Payments: Any “electronic funds transfer” means any transfer of funds which is initiated by a person by way of instruction, authorization or order to a bank to debit or credit an
account maintained with that bank through electronic means and includes point of sale
transfers; automated teller machine transactions, direct deposits or withdrawal of funds,
transfers initiated by telephone, internet and, card payment.
• Payment and settlement systems in India covered by the Payment and Settlement Systems
Act, 2007 (PSS Act) are regulated by the Reserve Bank of India (RBI) and the Board for
Regulation and Supervision of Payment and Settlement Systems (BPSS)
• Role of players in digital payments ecosystem: A payment system consists of a set of instruments, banking procedures and guidelines, service providers and processors
that ensure the circulation of money in an economy.
• Emergence of Payments mechanisms in India
20112010
AePS
2011
IMPS CTS
2012
RuPay
2012
NACH
*99#
20142016
UPI
BBPS
20162016
NETC
BHIM
20162017
BQR
5.2 Summary
• Core payment systems in India
1. Electronic Clearing Service (ECS) is an electronic mode of payment for transactions that can be used for making bulk payments or receipts
2. Real Time Gross Settlement (RTGS) is a funds transfer mechanism where transfer of money
takes place from one bank to another on a 'real time' and on 'gross' basis.
3. The National Electronic Fund Transfer (NEFT) system is a nationwide system that facilitates individuals, firms and corporates to electronically transfer funds from any bank branch to
any individual, firm or corporate having an account with any other bank branch in India.
• Governing/regulatory/statutory bodies in Payments
1. RBI: The Reserve Bank of India as the central bank of India has been playing this developmental role and has taken several initiatives for Safe, Secure, Sound, Efficient,
Accessible and Authorized payment systems in the country.
2. NITI Aayog was entrusted with the task of undertaking a campaign to implement digital payments systems and it has been working on an awareness campaign to popularize the
different modes of digital payment
3. NPCI Envisages the vision of touching every Indian with one or the other PAYMENTS SERVICES and to be the best payments network globally .
End of Module
