Smooth Roads and Long Journeys

June 22, 2016

Meet AP Hota, MD&CEO, National Payments Corporation of India (NPCI), the man overseeing the setting up of a nationwide payment infrastructure that will enable barrier-free tolling. Over the last five years, NPCI has travelled a fair distance itself, starting from a single service of switching of inter-bank ATM transactions. Today, the range of services has grown to cheque clearing, immediate payments, automated clearing house, electronic benefit transfer and a domestic card payment network named RuPay. Its long-term goals are to get every Indian to start making digital transactions in every sphere of life, reducing their dependency on ATMs.

Excerpts from an interview:

What is the relevance of NPCI to infrastructure?

NPCI falls into the category of financial market infrastructure. Our infrastructure is not visible to the naked eye. The financial market infrastructure, however, is huge. Within this, NPCI plays the role of a utility. We are like a utility to the banks wherein we facilitate over 20 million transactions daily.

Surely, such volumes require a robust data connectivity network?

Yes, the most important challenge is the telecommunication and data networks that we face in our work to connect banks and to connect people. While all the major banks are already connected, there are banks in the remote areas that cannot connect because the data grid technologies are not in place. There is an attempt to make mobile banking available and pervasive. However, only the short-message service (SMS) and call services are available throughout the country, not the data grid services. This is where the government’s optic fiber network, whenever it gets rolled out, will be useful since only then, financial services will be able to ride on that network.

Moreover, in financial services, we need 24*7 power. This is why companies are shifting their data centres to Hyderabad because, possibly, the availability of power there is much better. For instance, beyond Vashi in Navi Mumbai, uninterrupted power is not available. This is why nobody wants to put up their data centres close to Mumbai because if they do that, their data centres will have to run on diesel generators and that will be much more expensive. Chennai, Bengaluru and Hyderabad are preferable destinations in comparison.

Even where you do have connectivity, India ranks pretty low on speed and quality of connection. Comment.

This is true. Even when someone is expected in our office, and we need to provide a demo, we have to be very careful to see that the mobile network is really working properly! Since connectivity is a problem, we may have to go to certain corners or areas where the signals are stronger to get the link. This is the scenario in a city like Mumbai in the middle of its new financial hub. Nonetheless, it is improving and there hasn’t been a serious issue that has affected any transaction in the real world. However, if we want to integrate the whole country with a digital payment system, the optic fiber network is something we will have to look at for this purpose. A great thrust is coming on our payments system on mobile devices.

How are you dealing with this?

The challenge is with respect to the data network. There are quite a few dark spots in the country where there is zero connectivity. There is no mobile connectivity even. We have come out with a solution which is that we use the USSD-based financial transaction. This stands for unstructured supplementary service data and it means that wherever the voice grid link is available, USSD also works. This channel is not a data channel but almost like a voice grid channel but on which messages can travel. It is possible at least for the GSM (Global System for Mobile Communications) phones. USSD is a capability built into the GSM standard. This is already in operation with almost a million transactions daily but for such a large country, a million transactions are also hardly anything!

Are you involved in the e-tolling project for setting up the clearing house?

The National Highways Authority of India (NHAI) has given us the responsibility to build the clearing house for e-tolling. In this system, we are envisaging a barrier-free tolling system. For this, at the back-end, the money transaction will happen through us.

Sometime back too, this had been envisaged. What happened?
What had happened then was that some toll booths were given to ICICI Bank and Axis Bank. ICICI Bank made it operational in about 160 toll booths and issued about 300,000 cards or so. Many of them are not working right now. A particular area was also given to each of the banks and they were not allowed to infringe on each other’s areas. Similarly, in the south, few areas were given to Axis Bank. However, Axis Bank did not start the project at all. ICICI Bank began but it was nominal. Now, however, there is a plan to make it inter-operable. In this new system, all banks will be able to issue cards. If this happens, and the data needs to go to different banks, there will have to be an interbank transaction. That will be done through the clearing house. We have started the work of building the clearing house. We are awaiting the Reserve Bank’s approval of the clearing system as this is a payment system with multiple banks. We expect the time-line to be around July or August. Initially, around 300 toll booths would start this off. It is already there in 160 booths by ICICI as mentioned earlier but they will have to slightly revamp their process to align with the new system. The toll booths have already been told to ready themselves along the Golden Quadrilateral, to start with. This can then be taken forward on the state highways.

Initially, they have mandated only one lane on each side. Gradually, they will increase this as and when the cards are issued in bigger numbers. The numbers of electronic toll collection (ETC) lanes will also go up simultaneously. In two-three years from now, most of the lanes will be ETC lanes. The cards will be sold mostly through the toll booths.

Do the cards issued by banks need to be displayed or would it be done via the license plates?

It will be an RFID card, and not with the license plate.

In the future, do we have to display these cards as a norm?

Yes, because one could probably tamper with number plates leading to problems in reconciliation. Moreover, all new cars released to the market also carry a chip with certain functionalities that can be leveraged. However, we are not adopting this like in many other countries. I do not know if the cars in India have this device with an RFID tag but nonetheless, the majority of the cars out there today are old cars. They would not be having this device so it is better to go for the card system issued by banks.

What are the new products that you are bringing to the market?

Quite a few, actually. One of them is the unified payments interface (UPI) which is an improvement over the current real-time money transfer. Sending money in real-time 24*7 via any channel was already there. Now, we have improved it by making it real-time collect. Earlier, it was only real-time sending. Also, earlier, for sending money, you needed the bank account number and other details. Now, I can just ask you a financial address. Suppose I want to send money to you and you have already registered under the new system, say – karan@hdfc – I can send money to this address. HDFC Bank will translate this to make the deposit in the appropriate account. So, the financial address is email-like.

The second product that we expect to introduce by the end of June is the bill payments infrastructure. Currently, we pay most of our utility bills mostly in cash or cheque. Therefore, we are setting up a national level bill payments infrastructure.

The third product is the e-tolling that I talked about earlier. The fourth product is tap-and-go payment. We are trying this out in Bengaluru with the public bus commute system. People can just tap a device and walk into the bus and tap it again before dismounting. These systems were tried earlier in different cities but they were not scalable. Now, there is a national specification and these would be rolled out based on some common standards. In fact, the name already proposed by the Honourable Urban Development Minister Venkaiah Naidu for this card is the National Common Mobility Card. This is proposed to work for buses, trains, taxis and even the metro. Hopefully, our project will begin in Bengaluru soon, followed by Kochi Metro which will be a full-fledged roll-out. In Bengaluru, the card will be issued by only Axis Bank but in Kochi, there will be multiple cards.

We also have a plan for coming out with RUPay credit cards.

What is your vision and your long-term targets?

People should be primarily transacting digitally, for every need, not relying on ATMs all the time. The banks are the custodians of people’s money as well as the prepaid issuers and we aim to facilitate their transactions. If people transact digitally, there will be less movement of cash and consequently, less printing of cash. The government will therefore, save a significant amount of money. The Reserve Bank of India is supportive of our initiatives and the government is also extremely enthusiastic about it.