Dr. Rajendra N, CEO, IFTAS talks through the evolution of different digital systems in India.
What are your primary roles and responsibilities as CEO of IFTAS?
I have been in this industry for the last twenty years working with the central bank, Reserve Bank of India as a CEO to drive the central payment related activities.
The company is currently looking at the Indian financial network. The network that connects all the financial institutions and banks in the country, enabling them to the NEFT and RTGS. Apart for this, as a communication backbone for the payment system and also the messaging backbone structure financial messaging system as a SFMS is being used by almost all the banks in India for doing the transactions. We currently take upon the Indian financial network and the NEFT, RTGS payment system for the banks. Also I am taking care of the RBI communication networks, security to fulfill the technologies related activities in the central payment system.
As the Chief architect of UPI, what are the challenges in the transforming India into digitally empowered society?
If you talk about the model itself, it has been challenged in many forums and many stakeholders did not agree and finally we could make them understand and convince them to take it further. Now I can say that the UPI model, architecturally that we have , is still very unique in globe. In this kind of system one challenge is the Consumer awareness and the second is the bank itself not being convinced about the model and other things. Third, is how the system can be developed and sustained.
Now, it is approaching billions of transaction for months and daily transaction crosses hundred millions. How did it create such kind of infrastructure? Infrastructure means the accommodation and many other challenges we have faced. We have done a lot of awareness programs for customer and for the developers and created a lot of workshops. The Fintech was also able to grasp an idea of how to do it and bankers gave also done lot of works of awareness. This UPI has created a new market infrastructure for converting the non-consumed segment by the mobile application they were using for calls and payments. The way it was driven, it could overcome all challenges and now it has been a success. Globally also it is the most successful payment platform.
What are the milestones in the implementation of systems like CTS, NACH, NFS and IMPS?
NFS was rolled out to be the first one. Then later on NFS has been hived up in 2010 to the NPCA. We created a new system before migrating it to the NPCA environment and also increased a lot of features, product and the system has grown into the thousand plus banks using it. That would be the NFS milestone.
CTS is also Bank of India initiative and in 2008 the bank through the Idea. It started as a pilot project at NCR regions. I was there during the pilot period and I remember we connected the banks in the NCR regions in Delhi for doing the low cut image based clearing In 2008 At the starting of the CTS the infrastructure and network communication were the biggest challenges. Then after the pilot was successful, the new entities created the new NPCA in 2009. They proposed to rolling out the CTS across the country. The challenge even for making the big image was through the network we needed to have front and back check and both need to go through the image based clearing system with the low bandwidth of that time. I did a lot of engineering lot and made this project sustainable and affordable to the end customer.
We then started the One southern grade. It was because of personal purpose that it was rolled out into the southern grade first. Then we went to the western grade and after the NBCI demonstrated the western grade we expanded to the northern grade also. Now all over India the image base clearing is happening successfully. Many people are not aware that this is occurring, that much smooth is the CTS system. This is the milestone of CTS.
IMPS is a product that NPCI has created in 2010 and this product is the first globally to have real time remittance in the retail segment and customer account is debited while the retailer account gets credited immediately. And, even in 2010 nobody could have imagined that real time transaction is possible and this process created by IMPS making it one of the product of NPCA.
The other product like NACH is similar to cheque automation. Earlier in cheque automation many clearing s were placed and people used to bring the cheques here physically and with big sorting machines they were sorted out and were given manually to every branch. Similarly an ECS clearing system was the distributor in the regional office and once NPCA created the clearing house by using the Automated National Clearing house that slowly became the standard for all the ECS systems. Later all transition got migrated into a single system and it becomes the national automated system for the entire country.
What are the challenges in digital payments system in India, both from a technology infrastructure and policy standpoint?
The core nerve system is the communication system. Communication network have to be very strong, reliable and available too. If you look 1998-99, BSNL and MTNS was the only form of connection and then market opened up with new players and that increased the availability of the network. Customer do not get hundred percent confidence that if they are carrying a phone application to complete the transaction and the merchant has another carrier connectivity, they are not able to do the transaction in that merchant’s location. Sometimes when the signals are weak the customer needs to carry the backup system. This is reason why in major establishment and major cities the merchant has both the mobile based and card based payment system and someone not able to access mobile based they can switch to card and make the payments. So that is one communication system we still need to improve from the customer perspective.
The acceptance infrastructure, now the smartphones are connected in the way of the acceptance as well as the payment . So now the barriers are being eradicated. Even in the remote places people are able to accept through the mobiles sitting at home. They are doing the transaction by simply calling someone in the phone remotely sending the link and make the payments. These things are still available and the acceptance regarding the communication links through the system are manageable. We have enabled a lot otherwise, we would not have been able to grow this far. Both in the government and regulatory body, lot of enabling classes has been introduced in a conscious manner and also there has been many free hands put forward to do the work into introducing the digital payment and acceptance. Although, a lot of new features are there to adopt in the digital payment.
How is the IFTAS team synchronized with the technology with the technology team at RBI?
We do not have connection with the RBI only. So we have to look after all the other connection like the Central bank. We work very closely and I think we will be able to make lot of thing introduction ahead also.
What are the key technology solutions being used at IFTAS and what are their use cases?
One is the messaging system and this system is traditional one of the key driving factors in payments areas and lot of improvements are coming in the technological areas. I would not mention any specific products but many things are happening from the database transaction to the message based transaction i.e allowing flexibility and also growth in the transaction basis. There areas on which the payment system has worked and people are also using our cloud programming during the NEFT and RTGS transaction through the cloud based solicits.
How has the pandemic accelerated the digitisation of Indian financial system and what has been the role played by IFTAS?
Many things have been closed due to the lock down but have you witnesses the payment or transaction being stopped anytime. It will never happen. So, the country has done tremendous things to ensure that payment is available in all the place and lot of new initiatives have also been taken. The systems to do their transactions, NEFT or RTGS and also settlement plans of institutions are connected to our network so to ensure that they are able to proceed with their settlements through our systems we have maintained hundred percent availability of our payment networks and our payment messaging systems, to enable the NEFT, RTGS and other transactions.
How can digital payment footprint be further enhanced to make it more inclusive especially considering India’s geographic spread a d social heterogeneity?
Various options are being worked out and also catering the digital as well as financial inclusivity. The complex environment of Indian geography, whether it is the north eastern states or it is the southern states everywhere the penetration of communication and financial products now has reached great lengths. You are aware of the delivery of the postal network in our country so hook and corners payment has been made available. Also, the need of the people are addressed even for those who are cannot use a pin number, they can use the biometrics to validate and authenticate their transaction. They are able to be a part of the system. Scheme for including the RuPay cost is one of the biggest drive that has added many people in the financial inclusion.