How NPCI became the flag bearer of India’s digital revolution

From humble beginnings to becoming a torchbearer of India’s digital revolution, NPCI has come a long way. Today, the organization is credited with launching several innovations that have no parallel in the world. The organization is perhaps the best example of what a state-owned enterprise can achieve, if guided with the right vision.

NPCI was setup as an umbrella institution for all the retail payment systems in the country, with the core objective of consolidating and integrating multiple systems into a nationwide standard business platform for all retail payment systems. Today, the firm has undoubtedly achieved its position as one of the best known innovators with a huge number of innovations such as IMPS, National Payments Switch, RuPay, Bharat Bill Payment System and more recently, UPI and BHIM.

In Jan 2010, NPCI started off on a humble note with 1.8 million ATM transactions (with 37 member banks) as a transfer of financial responsibility from the National Financial Switch (NFS) from IDRBT to NPCI. Today, this business has grown to 100 member banks with a daily average transaction count of 11 million. Currently, all the 2,35,000 ATMs are interoperable.

The other services that were handed over to RBI from NPCI included cheque clearing and Automated Clearing House (ACH). Currently ninety six percent of the cheque clearing in the country happens on NPCI’s cheque truncation system.

Recollecting the past, A P Hota, Managing Director, NPCI, says, “NPCI was entrusted with upgrading the Electronic Clearing System (ECS) credit and debit systems. There are 1200 banks that are a part of the system and have an infrastructure that can support 50 million transactions a day. These are the 3 activities that RBI had handed over to us and NPCI has also built quite a few systems. The maiden system built by NPCI was Immediate Payment Service (IMPS), a real time money transfer on a 24/7 basis. India is the first country in the world to have built this system with real time availability.”

What’s noteworthy is that India started the system of providing immediate payment. “We are the model for many countries in the world for giving real time credits. Apart from India, there are about 16-17 countries in the world providing real time credit. IMPS is a system that India can take pride in,” opines Hota.

As an improvement of the IMPS system, NPCI brought out the Unified Payments Interface (UPI). It operates on the top of IMPS and facilitates immediate-sent and immediate- collect. The money transfer is also possible on a virtual Payment Address (VPA), where the customer need not share his account details. Just an email like address is adequate.

Huge success of RuPay

Another big product that has been a huge success is the RuPay card. The card base with three hundred fifty million is the highest. What is noteworthy is the fact that this has been achieved in a short span of 4-5 years. “NPCI has a market share of forty percent in terms of the volume of cards. ATM Transactions wise, NPCI has thirty percent market share. For PoS and ecommerce, the market share is 10 percent. RuPay has been made the default card for government schemes. The cards are being issued by about 688 banks in the country. Visa and MasterCard have been in the country for four decades during which they gave the card facility to fifty four banks. NPCI in just 4 years, has been able to bring six hundred eighty eight eight banks in the card payment ambit in the country. It’s a remarkable achievement,” opines Hota.

RuPay is now accepted in PoS and ATMs. NPCI has also launched the Aadhaar based Payment System (AePS). “Using Aadhaar, we have built two systems, one is called the Aadhaar payments bridge, and the other called Aadhaar enabled payment system. The Aadhaar payments bridge helps in making payments which can be used in paying salaries, in the Direct Benefit Transfer Payments (DBT), LPG subsidy, MNREGA payments etc. The AePS enables daily transactions with Aadhaar authentication. This facility is used by one hundred and twelve banks. About fifty of them are interoperable on this service. It means the business correspondent of one bank can service the customer of other banks,” says Hota.

For feature phones, NPCI has created a feature phone based mobile payment system called USSD. This provides easy access of e-payments from ordinary features phones. The average daily transactions on USSD is close to 6,50,000. This number used to be about 1,50,000 prior to demonetization. The NPCI will soon bring a common app for the benefit of those banks who have not developed any app for their consumers. The USSD infrastructure is also upgraded to provide an UPI like experience on the feature phone.

Another less talked about innovation is the Bharat Bill Payment System (BBPS). It brings all the billers like power distribution companies, telcos, DTH operators, and different kind of utility companies (water, gas companies) on a common platform for sharing of bill information. On a service outlet or a Citizen Service Centre (CSC), all types of bills can be paid because they are connected to the national platform. BBPS has just started on August 30, 2016. “In the first three months, we have rolled out about twenty banks and eighteen billers. Most of the billers are electricity companies. Efforts are on to bring fifty large banks in the country and also about three hundred billers in the next few months.

The last major initiative which is operational is the National Electronic Toll Collection System (NETCS). Using RFID technology, the vehicles with the RFID tags can move seamlessly along the lanes fitted with electronic toll collection (ETC). All the ETCs on the national highways will all be a part of the toll collection system. The system has been running for the last two years with ICICI bank as the only issuer. “We have taken up the work of clearing and settlement after the service was open to all the banks and the need for clearing house was felt. NPCI provides that clearing house and reconciliation system and daily about 95,000 transactions are cleared. As of now, only the national highway toll plazas are connected and are a part of the network. State highway toll plazas are yet to be connected. On an experimental basis, we have taken the Mumbai-Pune expressway, which is a straight highway. In a year’s time, we propose to bring a few more state highways to be added on the network,” says Hota.

Continued innovation

NPCI continues to make huge strides. For instance, the BHIM app, which was launched recently for fast and secure cashless transactions has recorded close to 20 million downloads. More recently, NPCI announced the launch of a mobile application for Aadhaar-based payments through BHIM App for merchants. The BHIM Aadhaar app works on NPCI’s existing product – Aadhaar Enabled Payment System (AePS). It allows the customer to make purchases using their Aadhaar number linked with their bank account. The transaction just requires a customer’s fingerprint for authentication. This product will cater to about 40 crore bank account customers spread across the country whose account is linked with Aadhaar.

NPCI has also collaborated with institutions such as Mastercard and Visa to develop BharatQR, an interoperable and low cost acceptance solution. BharatQR has three key benefits. First, consumers will not need to scan different QR codes at the same merchant provided by the different payment networks. Secondly, merchants will only need to display one QR code at the storefront or through the acquiring bank’s mobile application. Third, the underlying specification for BharatQR can be implemented in other countries to deliver a globally interoperable solution.

The list of innovations that have been pioneered by NPCI can be considered equivalent to those pioneered by established technology giants such as Google and Microsoft. NPCI’s success shows that if there is a strong will, even state-owned institutions can raise the bar for innovation to a different level.

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