Reserve Bank of India in its Payment
and Settlement Systems in India: Vision – 2019-2021 document outlines the need
for ADF to facilitate innovations in Digital transactions and reduce the cost for
digital transaction acquirers.
QUOTE
Creation
of an Acceptance Development Fund (ADF) to subsidise acquirers for deploying
PoS acceptance infrastructure in tier-3 to tier-6 centres. This would help in
facilitating innovation and reducing cost of such transactions.
UNQUOTE
The share of digital transactions in
Tier 3 to Tier 6 centres in the overall financial transactions’ portfolio is
less when compared to Tier 1 or Tier 2 centres.
One of the reasons for the low share
of digital transactions in Tier 3 to Tier 6 centres, is the acquirer’s reluctance
to deploy the required infrastructure for digital transactions stating a long
gestation period.
Hence, the need for an ADF to speed up
the infrastructure roll-out for Safe Digital Transactions.
The concept of Acceptance Development
Fund (ADF) was first mentioned by Reserve Bank of India in ‘Concept Paper on
Card Acceptance Infrastructure’, released in March 2016.
This concept paper outlines the
contours of the ADF i.e ADF Management, contribution to ADF, parameters to
receive grants from ADF etc.
The March 2016 concept paper mentions
about ADF to strengthen Card Acceptance infrastructure.
In other countries, Mastercard and Visa -
the two dominant card network players, are a major contributor to ADF, as cards
constituted a major chunk of digital transactions.
However,
the main differentiation between India and other countries is UPI. UPI has no
parallel anywhere else.
The launch of UPI (Unified Payment System)
has shaken the world of digital transactions. Digital transactions are no longer
restricted to Net banking or Debit cards. Now, UPI commands a growing share of
digital transactions.
Today’s POS terminals support a wide
variety of digital transaction channels i.e Credit Cards, Debit Cards, UPI,
BharatQR
The day’s of POS terminals supporting
only Credit Cards or Debit Cards are getting over.
A cursory reading of ADF in other
countries shows that the ADF is heavily tilted towards POS terminals.
However, as the formation of ADF picks up
speed, there may debates on the varieties of digital transaction channels which
may require ADF support.
The beauty of India’s digital
transactions is that it comprises a large number of channels, each channel
having its plus and minus points.
Let us wait and watch for the ADF
rollout.
Malaysia’s central bank to improve the
payment infrastructure in the country, set up the Market Development Fund (MDF)
in 2015, under which credit card scheme providers can contribute by channeling
0.1% of each payment card transaction.
Acceptance
Development Funds have been successfully deployed in several countries,
including Indonesia and Poland too.
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