H R Khan: Banking, electronic payments and road ahead
Special address by Shri H R Khan, Deputy Governor of the Reserve Bank of India, at the
FICCI-IBA (Federation of Indian Chambers of Commerce & Industry - Indian Banks'
Association) Conference on "Global Banking: Paradigm Shift", Mumbai, 25 August 2011.
* * *
The speaker gratefully acknowledges the assistance provided by Shri. G. Srinivas, General Manager and
Shri. Saswat Mahapatra, Asst. General Manager in the preparation of this address.
Distinguished Ladies and Gentlemen
I am glad to be in your midst today to share my thoughts on "Banking, electronic payments
and the road ahead". In fact the subject of my address very well fits the theme of the
conference "Global banking: Paradigm shift" and its emphasis on productivity excellence. I
am sure the experts whom you would have heard and interacted with over the last two days
would have shared their thoughts on the changes and challenges that banking in India and
globally is undergoing and has undergone over these last few momentous years, leading as
it were to a paradigm shift in the way banks are doing their business and retaining and
increasing their customer base. The basic underlying current that runs through this changing
landscape is the ever increasing reliance on technology to cater to the needs of customers
and process vast number of transactions including payment transactions.
In fact as you all are aware, payment and settlement systems form the backbone of any
economy. They are the conduits or the arteries for conducting trade, commerce and other
forms of economic activities including remittances in any country. An efficient payments
system can be envisaged as the lubricant which speeds up the liquidity flow in the economy,
thereby creating the necessary impetus and momentum for economic growth. The payments
process is a vital aspect of financial intermediation; it enables the creation and transfer of
liquidity among different economic agents. A smooth, well functioning and regulated
payments system thus not only ensures efficient utilisation of scarce resources but also
eliminates systemic risks. The payments and settlement system is, therefore, a crucial
component of the financial infrastructure of any country and more so of a country like ours.
The spectacular growth in financial transactions in the country has necessitated certain
radical changes in the payments and settlement system, whether it be in the area of
wholesale payments or retail payments. While the changes in the wholesale payments are
devoted to providing an efficient channel for transmission of monetary policy signals, and for
the smooth functioning of various markets, the changes in the retail payments are aimed at
providing efficient and timely payment mechanisms to the citizens of this country. The
payment system also assumes importance in the context of domestic financial sector reforms
and global financial integration that the country is undergoing currently. Foreign investments
(direct and portfolio) are encouraged by the availability of an efficient payments system, as
also the need for a low cost remittance facility for migrants to send money to their kith and
kin within the country. Improved, faster and cheaper domestic money transfers through the
payments system is also a part of the emerging scenario.
Given this scenario, let me through the remainder of this address devote myself to providing
a bird's eye-view of the current payment system landscape in the country; the other
significant initiatives that have been undertaken; the game changers that would provide
further fillip to this endeavour; identifying the potential goldmine as it were for deepening this
process; the enablers to take this process forward; the challenges faced at the industry level;
the role of the regulatory framework which could serve as a catalyst; and conclude with what
I would call the 5 A's of payment systems for providing an efficient, robust, safe,
costeffective payment services to our fellow citizens.
Section 1: payment system landscape in India
The stage of payment system development in a country to a large extent depends upon the
adoption of technology, introduction of new payment instruments and the confidence of the
public in using these payment instruments. In India cash still continues to be the predominant
payment mode. This can be gauged from the fact that value of bank notes and coins in
circulation as a percentage of narrow money is very high at 60.07% for the year 2009-20101,
when compared to other emerging economies like South Africa (18.51%), China(18.83%),
Mexico (39.14%). Brazil comes close to India with 52.70% of the value of banknotes and
coins in circulation as a percentage of narrow money. This is perhaps a pointer that we have
been relatively slow in embracing cashless payment modes and using them as cash
substitute. The pre-dominant use of cash could also be attributed to the fact that the process
for adoption of non-cash mode of payments started relatively late in the country.
Notwithstanding this, the Reserve Bank has been in the forefront both as operator and
facilitator for promoting the use of cashless payment instruments in the country. The
technology implementation in banks which have shaped the payment system in turn is
largely driven by the recommendations of the various committees set up by RBI. Payment
system modernisation started in late eighties with introduction of MICR based cheque
clearing in mid eighties.
Paper based clearing: Paper based Clearing accounts for 59% of the total volume of
transactions while it represents only 10% of the total value of transactions. RBI has taken a
number of initiatives to promote efficiency in paper based clearing such as widespread use of
MICR technology at 66 major centres in the country. Simultaneously, the introduction of
speed clearing in 2008 has facilitated collection of outstation cheques on a local basis
leveraging on core-banking infrastructure of banks. Speed clearing is currently available in
240 centres across the country.
Cheque Truncation System was operationalised in the National Capital Region, New Delhi in
February 2008. Chennai has been identified as the next centre for roll out of a grid based
CTS (to be operationalised by NPCI) which will cover the states of Tamilnadu, Kerala and
Karnataka. All activities pertaining to roll out of CTS for Grid-based CTS at Chennai have
been completed and the system is ready for roll-out by NPCI.
A new automation software package called "Express Cheque Clearing System" (ECCS) has
been developed. ECCS, being implemented jointly by SBI and NPCI, would replace the
Magnetic Media Based Clearing Software employed in automation of Clearing Houses
available at 1093 locations. It is expected to be rolled out across all these centres by
September 2011 along with the speed clearing facility.
Electronic Payment Systems: Electronic Payment Systems accounts for 41% of the total
volume of transactions while it represents 90% of the total value of transactions. Introduction
of electronic payment products such as Electronic clearing service and electronic funds
transfer, which over the years have metamorphosed into National ECS and National EFT
and RTGS have ushered in new ways of payment processing.
National Electronic Fund Transfer (NEFT): NEFT was introduced in November 2005 now
covers 77,821 branches and offers eleven hourly near real-time settlements on week days
and five settlements on Saturdays. One of the unique features of the system is a mandatory
"Positive Confirmation" to the originator confirming successful credit to the beneficiary's
account. Since its inception, the system has witnessed a surge in the volume and value of
transactions with 1.4 million transactions settling on a single day which is the highest volume
processed till date.
The ECS suite of products
Electronic Clearing Service (ECS) suite including NECS:
enables bulk payments. The ECS suite consists of local ECS (jurisdiction limited to local
clearing house branches), Regional ECS (state-wide jurisdiction in 9 centres) and National
ECS (pan-India coverage). Both RECS and NECS facilitate STP-based processing of bulk
payments in a centralised manner in all core-banking enabled bank branches within their
jurisdiction. Average monthly volumes are 8.05 million transactions (ECS Credit - NECS,
Regional and local) and 13.40 million transactions (ECS Debit - Regional and local), while
monthly values are averaging about Rs.126.43 billion and Rs.60.60 billion for ECS Credit
and ECS Debit respectively.
Real time Gross Settlement (RTGS): The RTGS system was introduced in March 2004 and
now extends to 77,093 branches as at the end of June 2011. RTGS settles gross inter-bank
and customer (Rs.2 lakh and above) transactions. On an average RTGS settles 1.8 lakh
transactions with a value of Rs. 4 trillion on a daily basis. Considering the importance of
RTGS for settling large value payment systems, action has been initiated for putting in place
a Next-Gen RTGS.
Other retail payment channels:
Credit/Debit Cards: One of the fastest growing segments is the card segment with
18 million outstanding credit cards and 228 million debit cards. During the year 2010-11
(April-March) 265 million transactions for a value of Rs.755 billion was transacted using
credit cards. 237 million transactions for a value of Rs.357 billion were transacted using debit
cards at PoS terminals. Maximum usage of debit cards happens at ATMs with 4235 million
transactions for a value of Rs.11,144 billion.
Pre-paid instruments: The pre-paid instrument issuers' universe is populated by both banks
and non-banks. In fact after the enactment of PSS Act, most of the non-bank entities who
have received authorisation to operate a payment system are in this business segment.
Policy Guidelines for issuance and operation of pre-paid payment instruments in India have
been issued to provide for a framework for the orderly growth of this nascent market. Further
measures have been recently announced by the Reserve Bank of India permitting banks to
issue prepaid payment instruments to corporates for onward issuance to their employees
after adhering to the norms prescribed.
Mobile Banking: The operating guidelines for mobile banking issued in October 2008 which
were later relaxed in December 2009, facilitating mobile banking transactions up to
Rs.50,000, both for e-commerce and money transfer purposes. Banks have also been
permitted to provide money transfer facility up to Rs.5,000 from a bank account to
beneficiaries not having bank accounts with cash payout facility at an ATM or Banking
Correspondent. 50 banks have been permitted to offer Mobile Banking transactions, of which
38 have started operations. The NEFT platform is used for settlement of all interbank mobile
banking transactions.
Inter-bank mobile payment system: The IMPS on the other hand is a service operated by
NPCI which provides an instant, 24X7, interbank electronic fund transfer service through
mobile phones. Publicly launched on November 22, 2010 this system facilitates customers
registered with their banks for this service to use mobile instruments as a channel for
interbank fund transfers in a secured manner with immediate confirmation features. This
service is in consonance with the Mobile Payment Guidelines 2008 issued by RBI which
stress on interoperability both across banks and mobile operators in a safe and secured
manner. Currently 27 member banks participate in this scheme.
National Financial Switch (NFS): The National Financial Switch as its name indicates is a
national infrastructure with pan-Indian presence provides a switching service for connectivity
across ATMs of banks. The NFS enables customers to perform their transactions (both
financial and non-financial) using ATMs under the NFS network without reference to the card
issuing banks. NFS which is the largest ATM switching network connects 80000+ ATMs with
an average daily volume of transactions standing at 4.7 million (both financial and
nonfinancial)2 and a value of Rs.2.5 billion. NFS is a service offered by NPCI.
Section 2: other significant initiatives
NextGen RTGS: Steps have been initiated to replace the existing RTGS system with the
Next Generation Real Time Gross Settlement (NG-RTGS) by adopting the latest technology
and emerging business processes. Some of the new features proposed to be implemented in
the NG-RTGS system are advanced liquidity management facility; extensible mark up
language (XML) based messaging system conforming to ISO 20022; and real time
information and transaction monitoring and control systems.
Core Banking Solution (CBS) in Reserve Bank of India: RBI is in the process of
implementing a core banking solution. The CBS once implemented will bring significant
benefits to all the key stakeholders like government, banks, primary dealers, FIs and the
common citizens. CBS in RBI will enable anywhere banking (specially payments) to
government departments, treasuries, sub-treasuries through online access and use of
epayment modes / delivery channels. In other words, it would facilitate government to use
RTGS, NEFT, NECS and other electronic delivery channels for making all its payments
through a single bank resulting in reconciliation being that much easier. Banks and financial
institutions will benefit from system of having a centralised account for funds and securities
and an on-line transaction tracking mechanism linking funds and security legs. CBS is also
intended to provide limited functionality of RTGS in case the RTGS services are not available
for any reason.
Section 3: game changers
Having given a brief on the payment system landscape in India let me draw your attention to
some of the trends which have within them the potential to drive our existing payment
systems into the next orbit.
Entry of non-banks in payment systems: Payment systems in India till recently have been the
domain of banks. With the legislation of Payment and Settlement System Act, 2007 (PSS Act)
the arena has been opened up for entry of non-bank entities. Currently 31 non-bank entities have
been permitted to operate payment systems such as issuance of pre-paid payment instruments,
providing cross-border in-bound money transfer, cards payment network and ATM networks. The
entry of non-bank entities has the potential to change the payment system landscape as these
entities can leverage on their product offerings with latest technological features to cater to wide
segment of the market. Of course the Reserve Bank has laid down appropriate guidelines and
safeguards to protect the customers' financial and other interest and promote orderly growth in
the markets. Entry of non-bank entities will promote competition and thereby provide more choice
to the customers.
Unique Identification authority of India - Aadhaar project - The unique identity number
(Aadhaar) is poised to be an important driver of financial inclusion initiatives. Aadhaar which
will provide a unique identification valid through the country when integrated with payment
system application has the potential to shape the payment system future in the country.
Rapid improvements in the payment infrastructure: Last few years have seen expansion
in the payment system infrastructure as a whole. There has been entry of new payment
system operators, growing acceptance of new delivery channels, new products, increase in
number of ATMs (80000+), PoS terminals (610156), augmentation and scaling of payment
processing infrastructure etc. We have also witnessed the use of services provided by
payment facilitators such as intermediaries, technology solution providers and merchant
acquirers gaining ground in the industry.
Setting up of National Payment Corporation of India Ltd: NPCI has been set up as an
umbrella organisation for retail payments with an objective of integrating and consolidating
various clearing houses in the country for cheques and electronic payments and introduce
new payment applications with focus on electronic payments. NPCI has already introduced
RuPay, an indigenous domestic card scheme. It has also started operating Interbank Mobile
Payment System (IMPS) which offers an instant 24X7, interbank electronic fund transfer
service through mobile phones.
Domestic Card scheme - RuPay: The need for a domestic payment card the "RuPay" card
is on account of two factors: (a) the high cost borne by the Indian banks for affiliation with
international card associations in the absence of a domestic price setter and (b) the
connection with international card associations resulting in the need for routing even
domestic transactions, which account for more than 90% of the total, through a switch
located outside the country. NPCI has since been granted approval to launch the "RuPay"
affiliated cards for use at ATMs and Micro ATMs. NPCI has been advised to ensure that the
use of these cards under the Aadhaar Enabled Payment System (AEPS) is in strict
compliance with the DBOD guidelines on Business Correspondents (BCs). 4 banks have
started using the RuPay card. These include: Kashi Gomati Gramin Bank; Bank of India
DhanAdhar Card; The Gopinath Patil Parsik Janata Sahkari Bank Ltd; NKGSB Urban Co Op
Bank Ltd.
RRBs in the payment system fold: The Report of the Working Group on technology up
gradation of Regional Rural Banks, set up by RBI in 2008, recommended that as a matter of
policy, all RRBs should begin moving towards CBS and achieve 100% coverage by
September 2011. Currently, 45 out of 82 RRBs have achieved 100% CBS status, and the
remaining are in various stages of implementation. You would agree that a CBS enabled
RRB opens up immense possibilities in terms of products and services. As a first step, the
sponsor banks would need to integrate the CBS of RRBs with their own Core Banking. This
would enable the customers of RRBs to enjoy the same benefits of anywhere and anytime
banking and the use of multiple payment delivery channels such as RTGS, NEFT, ECS,
ATMs, internet, telebanking, mobile and SMS banking etc.
Payments as a revenue model getting attention: There is growing feeling that increased
competition has commoditised the payment services undermining its profit generating ability.
However, the McKinsey Global Payment Map, 2009 pegs that the payments services
generate worldwide revenues of more than $900 billion each year (figure for 2007) which
represent roughly 25 to 30 percent of total bank revenues. Payments services thus not only
provide a steady income stream for banks but also provide them daily opportunities to serve
consumer thereby reinforce their brand. In India the recent spurt in cashless payment modes
provide ample opportunity to payment system providers.3 It is therefore necessary that banks
view their investment in technology not as a cost but as a revenue making proposition
enabling customers to access banking facilities especially various payment modes at their
comfort without necessarily visiting a brick and mortar branch.
Section 4: identifying the goldmine
Let me know dwell upon some of the untapped opportunities for banks.
Financial inclusion - Untapped market: It would become very evident from the following
figures that financial inclusion should be seen not only as a social responsibility but also as a
potential business model because of the huge untapped market that it seeks to bring into the
fold of banking services. In India almost halh the country is unbanked. Of the 6 lakh villages
in India, the total number of villages with banking services stands at less than 1 lakh villages
as at end March 2011. India has a highest number of households (approximately 145 million)
who are excluded from banking. Thus this "bottom of the pyramid" which comprises a huge
section of the Indian population presents a large untapped market with a tremendous
business potential. Therefore, the banks in India need to devise appropriate strategies for
tapping the banking value that is represented by these large number of households at the
bottom of the pyramid.
Government transactions - Transfer of benefit schemes: The largest chunk of
government transactions with the citizens comprise revenue collection and transfer of
benefits under various social programmes. McKinsey Report 2010 "Inclusive growth and
financial security: The benefits of e-payments to Indian society" estimates that an electronic
platform for government payments to and from individual households could save an
estimated Rs.100,000 crore a year - representing almost 10 percent of the total payment
flows between the government and households. The report states that "delivering
government payments electronically to the poor will not only pay for itself but will connect
households to a formal and secure financial grid. The basic infrastructure and connectivity
this provides will also create an attractive business proposition to encourage private players
to enter this space and provide services to the poor". The Reserve Bank has recently issued
"Operational Guidelines on implementation of Electronic Benefit Transfer (EBT) and its
convergence with Financial Inclusion Plan (FIP)". These guidelines are expected to give a
fillip to financial inclusion efforts and lead to a scalable and sustainable financial inclusion
model. In fact as you may be aware the Union Finance Ministry has advised all state owned
banks and financial institutions to make payments only through electronic transfers and not
through cheques from 1st September 2011. This move is part of the e-governance initiative
to move towards a paperless funds transfer system. For the banks as well this would be
economical proposition as it would reduce paper handling costs.
There is
Potential triggers - Public transport, toll payments, tax payments etc.:
tremendous scope for introducing stored value cards for public transport systems, toll taxes
and local tax collections. The national highways alone constitute 40% of the total road traffic
in India. The government had appointed a committee under the chairmanship of Shri.
Nandan Nilekani, Chairman, UIDAI to examine all technologies available for Electronic Toll
Collection (ETC) at the toll gates which has recommended use of RFID tags for electronic toll
collection on national highways. Similarly the integrated urban transport projects being
implemented in metros like Mumbai, Delhi, etc, have potential for stored value cards. The
store value card could be used for both contact and contactless payments for low value
payments and could be modelled upon Oyster card in London and the Octopus card in
Hong Kong.
Tapping the value chain - Banks could identify the needs and requirements of customers,
merchants, distributors, industry they are serving and create value proposition. With industry
focusing on rural and semi-urban India, they would require a mechanism for channelizing the
proceeds across vast geographical jurisdiction. Banks could tap this huge potential.
Let me quote an example here. We all know about Fabindia which is a major player in the
Indian retail market. Fabindia started as a wholesale export company in 1960. It has
17 community-owned companies as its associate companies. "These companies have their
own warehouses, contributing to the efficiency of Fabindia's supply chain. Their principal
buyer is Fabindia, which positions itself as an ethnic-chic store for a variety of products,
particularly garments. Fabindia focuses on retail, wholesale exports, and institutional sales to
corporations, resorts and hotels. Fabindia had US$ 80 million in sales in 2007 and plans to
establish growth to 250 stores over the next four years. Artisans Micro Finance Pvt Ltd owns
49% of Fabindia, while 20,000 artisan shareholders own 26%, with private investors and
employees making up the final 25%. As a community-owned company, the value of the
artisans' shares increase as the company's stock rises. Some artisans have doubled their
share value, which they can use as collateral for loans".4 Thus the lack of an organised
supply chain which usually results in extremely low price realisation for individual weavers
and artisans, has been overcome in this case.
I would therefore urge the banking industry to look at such propositions for creating and
tapping the value chain.
E-commerce and m-commerce - Future ahead: As per the report on the E-commerce
released by the Internet and mobile Association of India (IAMAI), the internet commerce
industry in India is expected to INR 46,520 crores by end of 2011. The e-commerce and
mcommerce are poised for a big stride in coming years. Banks and payment system operators
could leverage on the huge potential of e-commerce and m-commerce.
Section 5: the enablers
Strategic Partnership - The evolving payment systems scenario offers new challenges and
opportunities to all segments of this industry. The new evolving landscape especially in the
retail payments area which I have highlighted above provide interesting challenges in
harnessing the potential of technology amongst different stakeholders such as banks, system
providers and other technology partners. These challenges encompass the search for new
business models, which are now cost effective and wider in their scope and reach in terms of
both geographical and customer coverage. Therefore the evolving payment ecosystem not
only would encompass banks and the technology in use but would also have as critical
stakeholders non-bank technology solution providers and system operators.
An example which readily comes into my mind is the need and relevance of crystallising such
a strategic partnership amongst banks, mobile payments service providers and mobile
network operators (MNOs). This is very much required as RBI as well as Government of
India have consciously adopted a bank-led model for mobile payments as opposed to a
MNO-led model for achieving the financial inclusion objectives. As you are all aware financial
inclusion in India consists of four set objectives which include (i) Savings cum Overdraft
Account; (ii) A Remittance Product for Electronic Benefit Transfer and other Remittances; (iii)
A Pure Savings Product ideally a recurring or variable recurring deposit and (iv)
Entrepreneurial Credit such as General Credit Card (GCC), Kisan Credit Card (KCC).
Moreover with the banks providing these products under the financial inclusion umbrella, it is
but necessary that they also ensure compliance with KYC/AML norms, create adequate risk
management framework and ensure prompt settlement of funds. Given this comprehensive
focus it is therefore necessary that MNOs actively collaborate with the banks to achieve
objectives for financial inclusion. Therefore, this facet of a strategic and collaborative
partnership framework needs to be recognised and given due impetus as it would provide the
basic banking services to the "aam aadmi".
Not only do I draw a reference to MNOs here, but I also refer to the role of payment
aggregators and payment gateways. These entities are essential specialised technology
providers who have come to occupy a niche area in the payment industry. Banks find it
convenient to make use of the services of these entities to help them in their payment
processing activities. While these entities play a significant role, it should be taken into
account by the banking industry that proper service level agreements need to be put in place
for minimising and mitigating risk including the safety of customer funds. I would draw your
attention in this connection to the contents of the "Guidelines on Managing Risks and Code
of Conduct in Outsourcing of Financial Services by banks" issued by Reserve Bank of India
and the measures listed therein for managing and mitigating risks associated with
outsourcing.
One more area of strategic partnership is outsourcing of activities. Outsourcing is a reality
that all of us have to live with. President Obama is fond of saying that jobs in USA have been
"bangalored" drawing an obvious reference to the fact that outsourcing provide cost savings
and efficiency in operation leading the business entities to focus on their core activities. We
are also witnessing a similar phenomenon in the banking sector with various activities
especially technology related being outsourced to specialized entities. Whilst this
arrangement has served the industry well, it must be recognised that outsourcing does not
result in abdication of providing efficient services to the customer nor should it result in
dilution of risk management practices and standards including the concentration risk of
relying on few specialised entities.
Technology trends - The new technology trends such as cloud computing, mobile
telephony and Service Oriented Architecture (SoA) etc, are likely to bring about significant
changes in the way payments would be processed in the future.
The Mobile telephony is pervasive and ubiquitous with close to 850 million5 subscribers
(as on June 30, 2011) and is expected to have 97% tele-density by 2015 (TRAI source). With
high tele-density, introduction of smart phones, new technology such as 3G, innovative
mobile payment solution providers mobile telephony is well poised to emerge as retail
payment instrument of the future in terms of costs, convenience, speed and reach. The
ASSOCHEM and Deloitte report "Mobile Payments in India New frontiers of growth"
April 2011 identifies the critical factors viz. mass reach (across small distributors, traders and
delivery agents), security, service provider agnostic, ease and convenience of operation,
leverage on existing infrastructure and competitive pricing as critical factors for the success
of mobile payments in India. The future of mobile payments in India will to a large extend
depend on convergence of business models of banks, telecom operators and other stake
holders.
Another technology which in conjunction with mobile phone is likely to drive the future
payment mode is NFC. NFC, or near field communication, enables the exchange of data
between devices in close proximity to each other. Use of NFC as a future payment
technology is gaining attention worldwide with many technology providers notably among
them Google are experimenting with this technology. NFC is quite successful in countries like
Japan. In India there have been a few test runs with NFC payments but products are yet to
be rolled out. Challenge with NFC is finding an ideal solution to host multiple cards in the
same NFC handset. Further, use of NFC would require changes in payment processing,
upgrading the PoS terminals at the merchant ends.
Liberalised business correspondent (BC) guidelines: BC guidelines have been
significantly liberalised with corporates including MNOs having been allowed to come in as
BCs. The banks are also now permitted to pay a reasonable commission/ fee to the BC. It is
hoped that these liberalised guidelines would result in expansion of the banking coverage
and along with technology provide a sustainable ecosystem for the unbanked and financially
excluded segments of the population to be part of formal banking network.
Aadhaar Enabled Payment system: NPCI and UIDAI in partnership are ushering in the
Aadhaar enabled payment system (AEPS).AEPS is a bank led model which allows online
financial inclusion transaction at PoS (MicroATM using handheld device) through the
business correspondent of a bank using the Aadhaar authentication. At present AEPS
service can be availed by customers at their respective bank business correspondent outlets.
AEPS will support four types of banking services viz. balance enquiry, cash withdrawal, cash
deposit and Aadhaar to Aadhaar funds transfers. UIDAI along with NPCI has piloted Aadhaar
enabled Payment System in Jharkhand. Basic transactions permissible over these accounts
include cash deposit, cash withdrawal, balance enquiry, and inter-bank money transfer. This
system also envisages the creation of an Aadhaar Enabled Payment Bridge which would
facilitate direct disbursement of government benefits to the beneficiary by credit to their bank
accounts using Aadhaar.
Section 6: industry level challenges
Convergence of products and channels - Competition, technology, increased customer
demand for comfort and convenience and regulatory initiatives have resulted in introduction
of several payment products and channels over the time. However, banks have built these
products and channels into separate silos and vertical. The CII-PWC survey "Payment
Business in Indian Banks" brought out this issue of separate silos and lack of interoperability
among these silos. For instance, in some banks the Core Banking System is usually dif