Digital Transactions in India-Zip Zap Zoom

          This Press Release by Government of India has started to create waves in the financial industry across the world.

          The full rollout plan will be unveiled in the next couple of weeks. As of now this is only a ‘trailer’.

          In simple terms, the focus is on to reduce ‘cash transactions’, in India and promote Safe Payments through cards and digital means.

          A series of steps both short term and medium terms are in the pipeline. Short term steps will be implemented within one year. Medium term steps will be implemented within two years.

          These will be chiefly implemented by Government Ministries/ Departments/ Organisations. Private sector too will join in once the benefits are visible.

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for introduction of steps for promotion of payments through cards and digital means.

          Promotion of payments through cards and digital means will be instrumental in :-

• reducing tax avoidance,
• migration of Government payments and collections to cashless mode,
• discourage transactions in cash by providing access to financial payment services to the citizens to conduct transactions through card/ digital means and
• shifting payment ecosystem from cash dominated to non-cash/less cash payments.

The essential features of the proposals for promotion of payments through cards and digital means include

• steps for withdrawal of surcharge/service charge/ convenience fee on card/ digital payments currently imposed by various Government Departments/organisations 
• introduction of appropriate acceptance infrastructure in Government Departments/ organisations;
• rationalization of Merchant Discount Rate (MDR) on card transactions
• a differentiated MDR framework for some key transaction segments;
• mandating payments beyond a prescribed threshold only in card/ digital mode;
• introduction of formulae linked acceptance infrastructure by the stakeholders of certain card products;
• rationalisation of telecom service charges for digital financial transactions;
• promotion of mobile banking;
• creation of necessary assurance mechanisms for quick resolution of fraudulent transactions
• review the payments ecosystem in the country.

Now it is up to the various participants in the Digital Transactions arena to roll-out innovative, simple, safe, LessCost, low size, solutions to fast track the growth of digital transactions. 

          These guidelines will be beneficial to the upcoming Payment Banks and Small Finance Banks to roll out appropriate products from Day 1.