Creation of an Acceptance Development Fund (ADF) to encourage wider card payment infrastructure, amendments to government rules to include digital modes of payment alongside other modes of payment, and the development of new portals by tax bodies to collect tax payments digitally are likely to figure in a package aimed at promoting electronic payment modes in the Union Budget for 2017-18.
The ADF, to be mainly driven by market players, will encourage wider deployment of card acceptance infrastructure such as Point of Sale terminals (POS). The government is also considering options to either set up a new payments regulator or to make the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.
The creation of this fund was earlier suggested by the RBI in March 2016 in a consultation paper. It will enable banks to speed up their merchant acquiring activities and increase penetration in existing and new markets. Contributions to the fund should originate from the card issuers, and card payment networks may also be co-investors in the fund. There could be different methods to determine the level of contribution — as a percentage of cardspend or as a percentage of interchange revenue generated when cards are used, the RBI had said. It will work as a financial pool which can be accessed to address some of the economic constraints associated with acquiring/setting up infrastructure to acquire card payments. This helps to reduce the stress on thin margins and also helps in reducing the payback period of investment for acquirers.
ADFs have been used successfully in some countries like Poland and Indonesia where the card payments ecosystem has seen a higher penetration of card acceptance, especially in newer market segments after the launch of the ADF. Recently, Malaysia has also set up such a Market Development Fund to set up 800,000 new terminals by 2020.
The General Financial Rules, 2005 are also likely to be amended in terms that electronic payment modes such as net-banking, cards, wallets, UPI, etc may be added to the traditional payment methods mentioned in the rules such as cheque, demand draft, postal order, fixed deposit, national savings certificate and paper bank guarantee.
The government will also update the Payment and Settlement Mechanism to ensure faster redressal of complaints to protect consumers from any fraud and any financial loss through electronic transactions. With regard to the development fund, sources said the card issuers, banks and the government are expected to contribute to its corpus. This will be used to subsidise the cost of acceptance infrastructure such POS machines. The Finance Ministry has already sought feedback from market participants to start this fund.
Apart from these measures, new web facilities may be put in place by the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) for consumers to pay taxes and other government payments using debit cards and digital wallets, apart from the net banking facility that is already available. Currently, portals to accept these payments are designed in such a way that only only net-banking facility can be used.