It is hard to think of an equivalent enterprise to the National Payments Corporation of India (NPCI) anywhere in the world.
Built as an umbrella organization for retail and settlement systems in India, it is a state-created non-profit owned by 56 banks, from public-sector behemoths such as State Bank of India and Punjab National Bank to homegrown private-sector players such as ICICI and HDFC, and foreigners including Citibank and HSBC.
Dilip Asbe, NPCI
“We started out with 10 core promoter banks,” says Dilip Asbe, acting chief executive of NPCI since the retirement of founding managing director and CEO AP Hota earlier this year. “We have diverse shareholders: public sector, private sector, regional, cooperative, foreign, and we were born from the vision of the Reserve Bank of India.”
That vision, he says, was “to promote the integrity, efficiency, inclusiveness and competitiveness of the financial and payments system”.
The goal was initially to create clearing systems for payments in India, and in particular to get digital transactions moving, though over subsequent years it has broadened into a range of other products from bill payment systems to credit cards and toll collection.
“Our mission is to touch every Indian with one or other payment service by 2020,” says Asbe, meaning that the whole population ought to be able to access and use at least one of these cashless opportunities.
One wonders how it works in practice to have so many shareholders with different ambitions and strategies.
“On an operational level it could seem challenging, but at the strategic level we are fully aligned,” says Asbe.
There is a board upon which 13 of the 56 shareholders are represented, and this board looks at policy decisions. Then there is a steering committee for each product with a number of different priorities, from systems related to the Aadhaar national ID card, to cheque clearing.
NPCI has been at the centre of devising and building the unified payments interface (UPI), a digital payments interface that stands out for its interoperability, meaning that any bank or financial services provider can use it, and that customers can transact money between multiple different bank accounts, cards and wallets using it.
“UPI has been scaling up, steadily, but we are moving towards sustained growth,” says Asbe. “We are crossing 100 million transactions on UPI and we have a lot of large merchants in the pipeline to go live in the next three months.”
It is also closely involved in the use of Aadhaar as a mechanism for financial inclusion and bringing the poor and unbanked into the mainstream. The idea is that by using the Aadhaar identification number, with its biometric authentication, subsidies and credits can be given to customers electronically.
Asbe says a new product will soon be launched in this area through which merchants can conduct transactions using Aadhaar biometrics.
Prime minister Narendra Modi has made financial inclusion a core of his tenure and a keystone of that policy is the Pradhan Mantri Jan Dhan Yojana (prime minister’s people money scheme) bank account, a free account with life cover, which Modi wants every Indian to be able to have. The account comes with a card called Rupay, and this is another NPCI initiative.
“Rupay is a product trying to compete with cash and other card-scheme providers,” says Asbe, including Visa and MasterCard. “We are making good traction now. We are close to 25% market share of debit-card transactions and already have over 50% market share in card issuance.”
Other initiatives include the bill payment service known as Bharat BillPay.
“We are still in the process of onboarding for that,” says Asbe. “The country has a huge number of electricity and water boards, which are not yet on digital platforms. But we believe in the next three to four months all the billers will be on the system.”
For UPI in particular, NPCI will be aided considerably by greater adoption of smartphones.
“Smartphone penetration is at about 400 million now,” he says. “In two or three years’ time if we are able to get 50% of smartphone users to transact, we will have achieved the objectives of UPI. But this is just the start. We still have work ahead.”
Asbe says that institutions come from all over the world to have a look at what NPCI has done and how it has made its model work. It welcomes them, believing that shared knowledge is to the broader good.
However, the model is not without challenges.
“Once you make digitization your agenda, and customers are trying to use mobile phones as a vehicle to do transactions, security becomes top of mind,” he says. “Customer awareness and education becomes the key.”