Ajay Kaushik, Founder & CEO, Panacea InfoSec explains how the pandemic has ensured less-cash but more transparent digital transactions.
With an aim to counter black money, counterfeit currency and terror funding network, the Narendra Modi Government on 8th November 2016 banned Rs 500 and Rs 1000 notes or around 86% of the national currency in circulation in India. The move was aimed to push digital payments leading to a transparent economy. And demonetization encouraged adoption of digital payments, opening the doors for several startups such as Paytm, Mobikwik, among others. Before 2016, debit cards were mainly used to withdraw cash from various ATMs but immediately after the note ban there was a surge in debit card payment at merchants.
Post-demonetization, both merchants and consumers were driven to adopt alternate modes of cash transactions. Moreover, the rapid penetration of the internet and mobile data across the last 2 years has catalyzed the process of adoption and increased the level of digital payment literacy in the country. The use of debit cards at point of sales (PoS) devices grew 83% since November 2016. According to the latest RBI data, such transactions were 23.47 crore in November 2016 and rose to 42.87 crore in August 2020. The number of transactions for use of such cards at ATMs grew 42% at 81.42 crore.
But, the recent COVID-19 outbreak did favour digital payments that even demonetization could not, opines Ajay Kaushik, Founder & CEO, Panacea InfoSec. In June 2020, value of transactions on the Unified Payments Interface, a platform created by India’s largest banks in 2016, reached an all-time high last month as people feared to handle banknotes amid the pandemic. Use of digital payments is soaring for everything from groceries, electricity bills and cab fares. As per the latest report by the fintech platform Razorpay, digital payments shoot up 23% from June 3rd to July 2 which is massive.
As per industry forecast Indian digital payments market is expected to hit $1 trillion by 2023 and big global giants such as Amazon and Alphabet are placing big bets on India’s digital-payments market where already many big local players exist. “However, with the rise in online payments, disputes related to digital payments have also gone up. And to address this rising digital payments dispute and ensure safety of the consumers, the Reserve Bank of India (RBI) has introduced Online Dispute Resolution (ODR) mechanism for digital payments — a much needed step to boost Digital Payments and give a competitive edge to India in global market and boost the customer sentiments,” says Kaushik. As per the RBI Governor Shaktikanta Das, initially operators will have to implement ORD systems for failed transactions in the payment systems. The ODR arrangements will be extended to other types of disputes and grievances based on the experience gained from this phase.
The RBI move aims to ensure safety of the customers from digital payment frauds. In normal circumstances, a dispute occurs when a service holder contacts its service provider to have their money returned. In other words, a dispute occurs when a customer asks for the return of his digital payment done earlier. Generally in India, solving digital payment dispute claims and check adjustments are painstaking manual processes that result in wasted man hours, inconsistent customer experiences, difficult error rates and potential losses related to non-compliance with regulatory and network rules. But, now after the RBI’s move, once a dispute or grievance gets lodged, a unique reference number shall be allocated by the ODR system. Facility shall be provided to the customers for tracking the status of the dispute or grievance using this reference number.
Although the Ombudsman Scheme for Digital Transactions, 2019 is in place, RBI’s move reflects that the central bank of India is in favor of a rule-based transparent technology-driven redressal mechanism with minimum of no manual intervention to deal with dispute in a timely and effective manner, concludes Kaushik.
Last but not the least, proposed online dispute resolution mechanism for digital payments by RBI will give technological advantage and improve confidence in the channel that would help achieve the digital India main objective of nudging the country to a ‘less-cash’ and transparent economy.