Digital Payments – expectations form a robust eco-system

The Govt has been asking public to switch to digital payments. Besides other benefits this will do away with need to have hard currency for day-to-day transactions. Further, it will keep track of transactions and ensure that the money is in the Bank accounts rather than being stashed away in currency notes.

At the outset it is accepted that is a very good scheme and will help a great deal in the fight against black money and corruption. Another great advantage of electronic payments is that makes the system available 24x7 and money transfers are not restricted to the office hours of banks. Such systems require a robust eco-system to survive and prosper. Following are some points to be kept in mind while developing/ensuring that a good eco-system is available so that public is assured that they are safe doing these transactions on line or through mobiles.

• Privacy Protection: Due care may be taken to ensure that companies providing services in this domain maintain and protect individual privacy. When the payments are made electronically, they leave a complete trail of where a person has been and what he or she may have done.  For example, if I start from my house, pay electronically to the Auto/Taxi driver, then enter a Metro paying electronically, go for lunch and tea in some restaurants in the afternoon and return. The trail of electronic payments will not only be recording/tracking the payments made but will also keep record of what and where I eat, when I eat, how I traveled and where all I have been at what time. Looking to the poor track record of the privacy protection by the mobile companies and almost lack of any regulatory mechanism to ensure that they maintain and protect privacy, one has to find a good model for ensuring privacy is protected in the in the electronic payment system and implement it in foolproof and fail safe manner.

• Data Security: This is of paramount importance because unless Security, Confidentiality and Availability (CIA) are ensured systems implemented do not serve much purpose.

• Dispute Resolution Mechanism: This has to be a very robust system and should be able to provide speedy redressal of grievances. Again track of regularity agency in mobile phone domain has not been something to be followed.  My personal experience have been that I have lost over Rs.4000/- to different mobile companies and I have nowhere to go. Other customers have also lost money and have similar experience. It is to be understood that Rs.5 or Rs.10 loss for each customer and with a customer basis 100 crores would yield Rs. 500-1000 crores. Customers do not pursue grievances for small amount because cost of seeking resolution / litigation is far more than the amount which has been lost.

• Digital Currency: One has to look at the experience of other countries (Cryptocurrencies) for taking precautions and care before implementing it.  The ‘sandbox trials’ (discussed in this paper) may be adopted to ensure minimum damage in trial and experiments.

• Link with Aadhar Number: It is suggested that instead of asking citizens to have multiple numbers we should try having all the numbers link/merge with Aadhar no. Some examples are given below:

• PAN Number: My PAN Card no can be exactly as my Aadhar number or to put it in other words – my Aadhar card number could be my PAN number there is perhaps no need to have another number for individuals. This will also ensure that no person has more than one PAN number. The numbering systems for PAN cards for Legal persons/companies etc could continue on existing lines.

• Bank Account Number: My bank account no could also be modeled in a similar fashion – it could be a combination of the IFC code of the bank/branch and my Aadhar no.  + 2 digit code to meet with the eventuality that I may have more than one back accounts in the same bank/branch. This will do away with the need of numbering and keeping track of different numbers for different purposes.

• Cash Handling Costs: There is substantial cost are incurred in handling cash. Releasing data on this will go a long way in moving people to move to Electrical payment. Moreover, just as the costs of handling physical currency are born by the Govt the costs in case of Digital Currencies may be born by the Govt.

• Incentives: Electronic transaction charges may be removed. We we use the credit cards at restaurants or for purchasing shoes or clothes etc. we do not pay any surcharge. Why should they be charging any surcharge when we purchase fuel at petrol pumps etc.