NPCI arm, banks, fintechs in talks to implement interoperable payment system

The Reserve Bank of India (RBI) recently approved the launch of an interoperable payment system for net banking, a move that is set to revolutionize Internet banking transactions. 

NPCI Bharat Billpay (NBBL), along with various banks and fintech firms, has reportedly initiated discussions to implement this system, which is expected to facilitate quicker fund settlements for merchants and enhance user confidence in digital payments.

The current state of internet banking

Despite the popularity of Internet banking for payments such as income tax, insurance premiums, and mutual fund payments, the lack of interoperability has been a significant hurdle. 

Currently, transactions processed through payment aggregators are not interoperable, leading to inefficiencies and a fragmented user experience.

RBI aims to address this issue by integrating Internet banking transactions into a centralized payment system, similar to the Immediate Payment Service (IMPS) and the real-time gross Settlement (RTGS) systems.

Increasing digital payment transactions

The RBI's 'Payments Vision 2025' document outlines an ambitious goal to increase the number of digital payment transactions by over three times by 2025 while also reducing the volume of cheque-based payments to less than 0.25% of total retail payments. 

Major players in the banking sector, such as HDFC Bank, ICICI Bank, and SBI, are actively involved in discussions to find the right implementation strategy for the interoperable payment system. 

The collaboration between these banks and fintech firms is crucial for the successful rollout of this initiative. The involvement of large payment aggregators such as Billdesk, PayU, and Razorpay, known for their deep integration with banks, highlights the potential for a more competitive and innovative market.

The future of net banking transactions

In December 2023, around 380 million net banking transactions were processed, showing that many people use this method for big payments, with the average transaction being Rs 2.5 lakh. Making payment systems work together smoothly is expected to greatly change how digital payments work in India.

This change will make it easier for customers to pay, encourage more people to use digital payments, and spread out the number of transactions over different ways of paying. This is a big step in making digital payments better in India.