 My name is Malavika Raghavan and I had something called the Future of Finance Initiative That's based in Chennai actually, which is awesome for policy because normally you never have anything based in Chennai And it's based out of the IFMR Finance Foundation. So a quick little bit about myself I'm a lawyer by training but in the last couple of years I've been working in policy and strategy and this is like a brand new gig that I started two and a half months ago Because this is a brand new initiative that we've kind of set up in partnership with the Gates Foundation to really look at the customer protection challenges that come out when we are in this Moment in our country's history where we're seeing this massive like, you know, large-scale change sweeping retail finance, right? Whether that's the driven by India stack payment banks rising mobile usage You name it and that's really changing the face of retail finance and that's why we're interested in this and obviously Mr. Ratan P. Wathal and his committee have really gotten involved in the digital payments side of things in a big way I would say the reason why this report is so interesting is because It really tries to reimagine what it looks like In terms of regulation for the country when it comes to payment systems so far We've been all of you who are who have companies have if you have a lawyer and have taken legal advice Have been looking at something called the payment and settlement systems act Which is kind of not it's built for a world where you had check payments, right? It's not really looking at like UPI and APS and that kind of thing So first thing I wanted to show you was what the front page of a report looks like in case you haven't had the joy of downloading 218 pages To read them at very short notice. So let me give you a little bit of a story about the report itself It was this committee was set up in August 2017 2016 with a one-year term. So by 2017 They were supposed to deliver the report However, in a surprise for Indian bureaucracy what happened is in four months time That's eight months before their scheduled end date. They actually delivered this report And they released it to the public just between Christmas and New Year's which was like quite excellent timing I must say for my holiday plans So what did the report really say? I Want to start off with the vision. I'm not going to extract any other part of the report before you get scared I think the important thing to highlight here, which I've tried to do with very bad like hand-eye coordination Is the fact that they're thinking about real choice, right? It's very laudable for this report and the committee They really talked about how cash has been in use for two thousand six hundred years I remember the words and they say that it's kind of served us well And what they want to do is open up more payment avenues for people to use different digital channels But what they then go on to say is that they want to reduce the cash to GDP ratio By 50 percent in the next three years. So we currently have about twelve point four percent a cash to GDP You know ratio of the in the country at least we did before demonetization And what they want to do is in three years time you have only about six percent of that I Don't know if this strikes any of you as a contradiction for those of us who are focused on customer protection And we are completely agnostic, right? We are not saying digital is great or cash is great or cash is terrible You know, we just come from purely a customer standpoint and all we want our vision is for Customers to have a range of channels through which they can transact Confidently and securely in this new world which are entering so that's kind of the vision and I'll jump straight into the recommendations. I Don't have any other slides We started putting together slides and it turned out that there were 13 recommendations again 218 pages and I think since I started I only have about like 10 minutes left with you guys So what I'm going to do is kind of put them into these Big five buckets and just talk through those if you have any questions at any point obviously you can keep talking afterwards and We're all on Twitter as well So what's the big biggie for all of the people in the room? What you might be interested in is the The committee is really making recommendations for open access to our payment systems to all non-bank payment services providers So that's what the PSP actually is and they're saying that If you're a payment services provider, you should be able to directly plug into the RTGS neft or imps system On the surface of it That's a I mean it's a great recommendation in that it allows more payment services providers to go straight to the payment systems without having to Go through banks as traditionally has been the case I think where we think that the report could have done a bit more is kind of layout how this affects banking and escrow arrangements I understand there was a talk in the has geek poony catch up about escrow Which we were actually hoping would happen here because we have asked the committee for feedback on this and not received anything yet And the reason why I think this is important is because those of you are wallets in the room or work for a wallet company you know that there are two types right of wallets and One backs on to a bank's account which is actually Protected by your deposit guarantee So if you demand the money the bank is obliged to give it out to you But the other kinds of wallets don't have this deposit guarantee at all So what then happens when somebody goes down, right? There is no obligation on the Reserve Bank of India to be a lender of last resort So as you can see already, there's some direct connection that we need to be mindful of on a kind of systemic level In the connection between payments and banking I know that we are kind of de-twinning this and we have this information gateway and I mean sorry Highway and payments highway and credit highway and all of the stuff we talk about but they are inherently linked And I think that's something to be mindful of So that's kind of first point. The second point is on a really kind of unprecedented Format that they've set up for payments regulation, which is quite interesting reading actually So they weigh up to alternatives They say we should have independent payments regulation currently as some of you will know the RBI regulates payments under the Authority it has under the payments and settlement systems act and what they really say is that Where they finally end up they first talk about a completely independent regulator and then they look at that model then they talk about a Board of which is independent within the RBI and then they break that down And I should mention actually one thread that runs through this entire report is about Competition and how we need more competition and more market entry and more kind of neutrality and more Transparency which is like all great stuff, especially for our market, I think and therefore they say that Given that we want this drive for competition We should have an independent regulator for one main reason really which is that the RBI Currently runs commercially the RTGS and net so as you know RTGS is for high-value transactions above 2 lakhs I think and and the net is for low-value transactions and the IMPS system Which we are all talking about in the morning as well is managed by the NPC I so they say now You have a commercial function and you're also regulating payments There's a fundamental conflict of interest here, right and we have some sympathy for that view because it's true like that's what's happening so again as Kind of responding to this report one thing that we are Happy with is that you should have a clear operational framework and you should actually think about you know Clarifying how payments work in this country However, there's one next step that they take is on the institutional level. What they say is you have this RBI actually You should have an independent board within the RBI Which is the we already have a department of the RBI which oversees payments Which some of you have had the luxury of like dealing with What they say is that you should give it independent board status something that I don't really understand How it would work because the RBI has one central board and everybody listens to that central board What they're saying up is say set up another kind of power center of sorts within the RBI And then we'll do some conflict rules for when you know, this power center doesn't agree with this power center, right? So I don't know how many of you are interested in like power play and dynamics But this is already creating some kind of like handani, you know kind of big brother younger brother fight I think the other point to note is that In our view, you know the the one thing the committee does do is talk about large-scale Spinning out of the RTGS and F right so they're saying in the long term RBI shouldn't be owning RTGS and F They should just spin it out So then where is the conflict point, right? Like if you're not if you're going to spin it out Anyway, how is the conflict happening and then I suppose the other thing to think about is if you if you don't have a Conflict and you do have this new regulator The kicker in this whole thing is that they say you should then the central government should set up rules for Delinating what is a systemically important payment system? Sips and a non-sip and the sips should anyway be regulated by the RBI So what do we have here? We have two power centers big brother younger brother and the big brother looks after Sips and the younger brother gets the non important guys and we go through all of this conflict rules and so on and so forth and We have this entity so you know somewhere that whole and and RTGS is going to get spun out So it's kind of a lot of noise I mean if your fundamental reason is to ensure competition and balance you're kind of doing a lot of things Which may not actually those principles kind of fall away anyway if you're spinning on RTGS and if you're giving back the main Payment systems to the RBI to regulate so anyway So for all of these reasons and several others which we've set out in our eloquently worded response Which is I hope you've read we just think that maybe you know headline if it ain't broke don't fix it Yes, I said that right Moving on to the last three buckets Consumer protection and data protection. So these are kind of things that we hold dear, which is why I wanted to flag it up to you guys The the great thing about the report is it does put it front and center So normally in our legislations we come from a very kind of provider perspective, which is fine But here they have said, you know, we should amend the main act which is the PSSA I was talking about to put in a provision for consumer protection a whole set of provisions This is great except on like closer inspection. What we find is we are defaulting to a very 1950s 60s view of consumer protection, which a lot of us working in the space We've kind of moved on from in that we just put disclosure requirements just disclose everything then it's caveat emitter Like if I tell you that my product does all of these things and I take permission to you know Check your messages control your vibration and do all sorts of things on your phone Then it's cool like what if you know if you if you download the app or whatever the payment system you have Then and then the other part of this is awareness creation So it says, you know, you've set up all of these programs and play all those fantastic movies before Film starts about how digital payments are like great and all of this stuff, which is fine You know, but we know it hasn't worked where we are right now at least with the FFI and IFMR finance foundation And a lot of other people we're moving towards a suitability regime right where you're saying if you are creating risks for the consumer You need to take some responsibility and do it well, right? And there are lots of providers in the market who are doing it. Well, like as I will talk about in my talk later this afternoon Which plug plug you should Attend if you're around there are some apps who do it really well They only take two permissions and they still do a digital payment and some apps which are taking like 80 Why you know So these kind of questions haven't really been thought through and that kind of links to the data protection point as well on this again I'll try and be quick What are the main things that they say one they say data protection is important when But they say we should do the data protection that is done in our wonderful information technology act Which exists in the country follow that regime and then they say banks don't currently have and payment services providers The kind of power to look into the funds that are being used in there Or you know look into the data to understand what funds are used for money laundering and these kind of purposes So I said three things there right on the first one data protection good. We agree awesome Second point the data protection regime in this country We should adhere to now as I will say in my talk later on this evening I think it's an open secret that the IT act for those of you who know that it exists Sets up the regime for sense protection of sensitive personal data, but in practice It's worded in such a way that you have no purpose limitation Hardly any obligations in terms of what you do with the customer protection customer data Which I'm sure those of the payment providers in the room are dealing with very carefully But if you don't like to be honest There's a limited amount of enforcement mechanism there to come after you if you do something wrong with the data So to kind of when there's so much lobbying in the country to kind of put in more protections for the IT act It seems I don't know why they didn't kind of take a step further We were hoping for them to say we need to be more proactive on this front And then the last point As I was talking about was around the fact that you know if you are in this kind of data protection world Like what do you need to do in terms of ensuring that you know that Like what are the kinds of particular enforcement mechanisms you kind of put in place as well Was there anything else I wanted to say on data protection, I don't think so but I'll come back to it I think I feel like I want to make one more point, but I'll come back to it because I can see I have six minutes left And lastly so mandating digital They basically say that a lot of these Kind of payments that exist in government government to government should be digital Government to person Derek benefit transfers should be digital. We're not really I mean, I'm not going to go into Frozen cons, but that's kind of happening. Anyway, I think the one that we would like to flag up is people to go They say for certain types of utility payments above a certain level People should be sorry. I think I've lost there people should be forced to do it digitally Which again seems just a bit a step too far really if you're starting to mandate that certain types of payments are digital What about older people? What about disabled people? What about people who don't have access to a digital channel all the standard concerns where we are not there yet? And then lastly this was the great part of the report that me and my team and I should point out they have Bhushan and Varun They will be helping with the Q&A's so you will see them We really enjoyed this section. We started seeing all these cool things in the report that weren't really Connected to digital payments, which was quite fun when you're like reading it in a hurry at like 2 a.m in the morning I think an interesting one to think about is They have an entire section around how Aadhaar should be used for pan filings That it is what it is The other one is they say that you should have State-run programs and provider and programs to highlight the costs of cash Great and then they say you should have measures to disincentivize cash So if you're a Merchant and you're handling cash payments above a certain level you actually have a penal penalty or a levy On you just for doing a transaction in cash And one thing that is more relevant for people like you and me in the room Essentially, they say if you're doing a high value cash transaction, just as a person not a merchant Now, you know, we have this rule that if you make a payment above 50,000 rupees You have to produce your pan card. So if you go to buy gold or you do all of these other activities You have to track the pan card. They're saying you lower that threshold. So it could be, you know um, yeah that you have to If you are so I'll just give you an example We work in affordable finance for housing and you have families who are buying their first house Which is an affordable house, you know low value house not very rich people and they often come with their advance Which is, you know, it's not a very big amount for people like maybe you and me in this room It'll be like 20 30,000 50,000 They'd only do that in cash because that's how, you know, they don't have they don't cut checks You know, so what happens to these kind of payments if you say you need a pan filing Maybe it's a farmer. Maybe they don't do pan filings, you know, maybe they don't So it's just I feel like we could have been a bit more thoughtful in this And then lastly and most fun of all is direct career billing. I only have four minutes left But I feel like this is something that's really heating up in the market. Um How do I summarize this there's a lot about it in the report. You should go read it It's great. We're eating and I don't normally say that about government reports But so three things firstly, they say direct carrier billing for those of you who don't know which I'm sure all of you do Is that you buy products through your mobile phone balance, right? Um, that's what it is. So if you have a prepaid mobile phone balance deduct balance by product postpaid By product appears on bill at end of month. Cool. Now what they're saying is Direct carrier billing already exists in the market as a kind of mobile value added service So like your ringtone in your callback, they're saying that's pretty much a like direct carrier billing So, you know, we should just allow it for all products if you want to take out a loan If you want to buy a card, you should just allow it through your mobile phone balance The other thing they then say is um, yeah, that you know, this kind of treatment should be given by the rbi And they should change rules for it and so on. So our objections to this on three levels First of all A service delivered on a mobile phone is not a mobile is a mobile value added service So long as it's tied to your main service, right? We don't think the direct carrier billing is actually a mobile value added service I should also flag that in the mvast market In 2014 unauthorized deductions and activations had gone to such a level that there were 10 lakh complaints filed with try Try then past regulations, which essentially shut down the market volumes have gone from like, I don't know like down to 7% or something Of what they were previously and so it's a market. That's right for like basically a lot of miss billing Um in light of our reasoning which we've set out in our recommendations We think that this is not actually mvast So we hope the rbi will take a look and the ministry of finance will take a look But more importantly if we do think it's direct carrier billing is, you know, a financial service Then if you're like you should be treated like a wallet, you know, what do you do with the patreon? You put money they deduct the money they follow ppi guidelines great So in this spirit of competition and market entry and so on You want to do the carrier billing and it's like, you know, deducting like a ppi wallet follow the regulations great If you are doing it in a postpaid balance, what is that? It's not a deduction It's essentially you're giving someone finance to buy something right like a credit card like I have my amix card I want to buy a car or I want to buy flight tickets They give me credit to the finance that purchase and I pay them back with interest at the end of the month Essentially, this is what is postpaid balance direct carrier billing fine Do go ahead and do it just follow what are the rules for credit? So this is our reasoning on all those three points I think I've kind of come to the end of my time If we have few minutes for questions, I'd be very very happy to answer and I should also Um point out Bhushan who's right here, uh, who is responsible for all of the mistakes in our response He works with me and I from our finance foundation. So if we have a few minutes, we can answer questions. Thank you, Malvika Uh, we'll take a few questions. There is one at the back there One here, Manu sir. So we'll start from the back and then I'll come to Manu sir Uh, could you just introduce yourself? I'll ask in the question. Thank you Hello. Hi, I am Manu Bhadwaj, formerly of J.P. Marwan Ches Um, how comfortable are you with, uh, quasi-industrial regulatory bodies like FDIC and SIPC equivalents? Uh, and their future in India potentially Well, to be honest, I don't really have a view on those. I think, I mean, I don't want to rip off of it because obviously I'm here working for FFI I mean, I think, I think, you know, regulation and new regulatory bodies are are good. Obviously it helps you have more Um, kind of, uh, enlightened regulation in particular spaces But we do have a culture of setting up new bodies in India which don't always work. So I think case by case analysis Yeah Hi, Manu, we got am I audible? Yeah Okay, so I really have two questions Uh, the first is with respect to the antitrust perspectives that the committee spoke about So, um, I remember Yadavendra saying in the morning that consumers don't really have Can't really choose the payment gateway To sort of make a digital payment and the competition act sort of has a host of Things that it bars like tiny arrangement exclusive arrangements. Do you think? um There's a way out for for this from a regulatory perspective is their best practices from other countries that we could follow My second question is with respect to Sorry, would you I don't know. Are you allowed to questions? I look as less strict than you used to be in last year. You can just quickly The second question is with respect to the disclosures and caviar tempter regime that you said Are we is it best to move towards and is the like standard form agreement? Are you a lawyer? Yes. Ah surprise surprise Okay, so I'll take the first one and just pitch in So on competition The thing is that competition competition issues don't exist in my view in a separate box They have direct implications for consumer protection It's a two-way thing under the competition act in this country. It's anyway It's only companies that you know kind of adjudicated at the company level It's not at a consumer level anyway um I think there are great best practices and consumers can choose like I think The cfpb for instance in the states is a great model the australian model Which is cited in this report as with the senate dependent regulator. That's also a good model There's also worst practice right like if you look um and with no disrespect I think the kenyan market the way it's it's a classic competition case the way Just uh, I just saw my time went to zero The way that market developed very quickly. Tell me if I'm talking too fast is they had a bunch of telecom players market tended towards a monopoly Quite like something unheard of of course and they have one single mobile operator who offers digital payments and credit M-paces style things now uh in this whole digital payment space and credit space What you think is the first movers will have high levels of um, you know price Pricing and then as more and more people come in pricing goes down consumers have all this choice Because they have a single mobile operator acting as a front end Now there is data coming out of kenyan to show that there is price stickiness right So consumers are still paying the same and there's a big as you know for those of you in the mobile space Now there's this big case and all of these disputes going on between Service providers and the mobile operators because the cut is too too much on the front end and that means some people Are denied access to certain people and certain other services all of this morass of things can be sorted I do think that because we have uh, you know some those two countries that I mentioned, uh, it's very easy to Uh, ensure that at least there is an ethic of consumer choice from a provider perspective And I I'm a strong believer that industry has a big role to play Like it should not be that you have to be beaten on the head with a stick Um, I think you should be able to do that otherwise. Did you have anything to add? Yeah on the is that point? What I would say is that is there really a long form agreement which works between sophisticated Just we'll just hold the mic And is there is a kind of derivative agreement basically Yeah, that's what's good. So between a retail consumer and our institution. It probably will not play out so well Yeah, and what was the second question it was to do that is does should we have an is that style for consumers? Caviar tempter. Oh, yeah, this is very important. I'm sorry. Let's take a minute caviar tempter. I think is Uh, I've argued in a blog post for IFMR finance foundation. I think it's an outdated standard I don't think as consumers we need to be you know dealing with 800 page click-wrap agreements I think there's an enlightened way. We've done it look up the schumer box in america They are doing like, you know, it's intelligent people using phones And of course you can have a level of complexity, but if you make Um, kind of a standard which works for everybody in the room You're going to get more Back right and I think we are ourselves a fairer standard where you have a fiduciary relationship almost with your consumer You take some responsibility. I think we're in a place where we can take responsibility Some more questions. There's one more the back there And And soon. Yeah Yeah Yeah, I mean the report has recommended that we adopt carrier billing as a form of digital payment And as I said, uh, there's our reasoning is having looked into it Analysis both on legal and commercial sides and consumer protection side. It doesn't appear to be a digital payment So I think it is conflating Categories if you call it a digital payment Currently it's in the gray area because what happens is that telcos have to share their revenues with the with the department of telecom And it's not sure how vast revenues will be shared between the telcos and the department and which is why it's not picking up Yeah Hi, I'm akshay. I'm a developer at PayPal As a consumer an important part for me is interoperability And I'm not sure if the report covers anything on that lines. Basically if I have a 200 rupees in Paytm wallet, I want to transfer it to say pay you all More be quick So what are the recommendations there and yeah, it's a government. Okay with that. Yeah They actually have quite a good section on competition and market entry. So for interoperability, they basically Deal with it at several levels. So they say ownership is one thing infrastructure is one thing and technology is another one So they said all across these levels. You should have a interoperability between Payment systems as well So even at the fundamental level between rtgs and whatever else comes up and then they said should there should be Interoperability between wallets and psbs basically all kind of providers as well So yeah, it does push for that it recommends it doesn't go into technical aspects. Unfortunately, so That's it. Yeah So You're talking about an independent payment regulator, right? I'm not so NPC is kind of acting like one right now, but so I mean they can't operate the imps and everything so How will the role of mpci anything change from I'm just digging into the vertical company report Like how do you if there's a new independent payment regulator? Yeah, they do talk about it. Yeah Yeah, and in fact, uh, so it's interesting, right this whole interoperability competition opening up things they also explain to npci so npci is currently has in its Kind of board or management only banks. They say non bank psbs should also be on the board of npci And they say this new regulator if it comes into place, they say that it should actually have on its board All of these people limit rbi appointees to the board and so on What it does say about npci is that If you kind of diffuse the kind of ownership of npci, it also says you should have multiple npci's So it says like so it's kind of envisioning a market where you have multiple npci is multiple payment systems multiple non banks plugging into various payment systems with interoperability between all of these payment systems and Then we don't know what happens to the banking side of things So it's it's great in that it pushes for a lot of this and I would say like npci is basically Entity that's running a payment system. They are acting like a regulator. That's I mean I don't really interact with them. I don't know if that's what they should be doing Anything to add npci is really a system regulator system provider right now under the payment and certain systems act And the vision is really to have more system providers so that there In terms of transaction charges, there is a lot of competition Yeah We have time for maybe one last question. Yeah, that's one person So hi, this is ruchi from pay you Right. So one of the things which I have been hearing is about the transactional charges and other things So it might be a vested interest in us in this question But don't you think that the reduction of any cost by regulation or by increasing this kind of Efforts will actually kill the innovation that is happening in the industry Yeah, and this is a point I mean It's interesting right because we have this report which very much stresses on on competition and in order to drive fair pricing For the consumer which I'm very much in support of however, what a lot of the recommendations do which is this You know this point on mandating digital and there's an entire whole section there Which you should go and look up between recommendation think six to Eight or something. Anyway, so they basically talk about how government should absorb the costs of digital right continuously It seems like Like we're trying to pick a winner here and I think if government starts absorbing costs of certain digital players and not other digital players I I find it a bit. Yeah, it is a bit problematic. I actually think it would be great I mean and this is just something I'm throwing out there in my own personal capacity No reflection on anybody I work for I actually think that the bigger kind of elephant in the room throughout this report is cash versus digital Right, they have an entire section on high cost of cash. They do not do a similar They actually say digital is low priced and low cost or something like that And the the kind of rhetoric in the report is that digital cost zero cash cost so much to the Government for printing and circulating and so on I think when great if they've done analysis on the last part and I think if you want to create a competitive market You shouldn't try and um work against cash so much. What you should do is build a free point of Use for digital right then it's equal like cash or spending so much to make it free to the consumer Digital should also work in the same way. How how is it fair to say, you know We'll kind of keep on disincentivizing this and we won't put in so I think that's okay I think if you build an infrastructure, which is free for use for everybody so that they're not passing on costs That one thing the difficulty comes where you have different providers at different stages of their growth Offering various transaction charges for commercial reasons Then clearly if you're favoring one kind of like upi currently has actually somebody asked this question in the morning How much does it cost? I think it's currently zero. It's actually 50 people transaction plus a 14 service charge of the transaction value Uh currently it's being subsidized So, you know, it's it's that already is competition in pricing implication I'm sorry if I meandered a bit, but I hope that answers the question. Okay. Uh, thank you malvika. Thank you boshan So, please give them a round of applause So