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RBI allows Interoperable Internet Banking Payment System, What is this?


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The Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced on March 4 that the central bank has given approval to NPCI Bharat BillPay Ltd (NBBL) to launch an interoperable payment system for internet banking. This system aims to speed up the settlement of funds for merchants.

“As a result, if a customer wants to make payment from his bank account to a certain merchant, the merchant’s PA and the customer’s bank must have an arrangement. Given the multiple number of payment aggregators, it is difficult for each bank to integrate with each PA. Further, due to the lack of a payment system and a set of rules for these transactions, there are delays in actual receipt of payments by merchants and settlement risks,” he said while explaining the need for interoperability.

What is Interoperable Internet Banking Payment System?

An Interoperable Internet Banking Payment System refers to a payment system that allows seamless and secure transactions between different banks and mobile operators through internet banking. It aims to simplify the process of making payments by enabling bank customers to use their mobile devices as a channel for accessing their bank accounts and remitting funds. This system is designed to be safe, secure, and cost-effective for both financial and non-financial transactions.

The Reserve Bank of India (RBI) has recognized the importance of an interoperable payment system for internet banking transactions and has taken steps to implement it. The RBI has given approval to NPCI Bharat BillPay Ltd (NBBL) to develop and launch this system. The goal is to facilitate quicker settlement of funds for merchants and provide a more efficient and reliable payment channel for various transactions, such as income tax payments, insurance premiums, mutual fund payments, and e-commerce transactions.

Interoperability in payment systems is crucial for the smooth functioning of the financial ecosystem. It benefits all participants, including consumers, merchants, governments, banks, networks, processors, and other service providers. With interoperable systems, end users find it easier to make and accept payments, while providers can generate revenue from payments that may not be achievable with closed-loop systems. Interoperability also helps in reducing delays in payment receipt by merchants and mitigating settlement risks.

This system will address the challenges faced by internet banking transactions processed through Payment Aggregators (PAs), which are currently not interoperable. The absence of a common payment system and a set of rules for these transactions leads to delays in payment receipt and increased settlement risks. The new system will enable faster fund settlements for merchants and provide a more efficient and secure payment experience.

Current Challenges

He noted that transactions processed through Payment Aggregators (PAs) are not interoperable. Each bank must integrate separately with each PA of different online merchants, making it challenging for customers to make payments.

Complexity of Integration

Governor Das highlighted that due to the numerous payment aggregators, it’s difficult for each bank to integrate with each PA. This means that for a customer to make a payment from their bank account to a specific merchant, both the merchant’s PA and the customer’s bank must have a specific arrangement in place.

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