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TRAI Chairman: A telecom-like interconnection charge for payments?

At the IAMAI India Digital Summit yesterday, the TRAI Chairman RS Sharma mooted the idea of the payments industry adopting something similar to an interconnection charge in payments. “My belief is that MDR is coming from the card world”, he said. “Digital Transactions will not become sustainable unless you address the three C’s of cost, convenience, and confidence. When I transfer cash, it doesn’t have any cost. But If I do a digital transaction, I pay someone. If I’m paying with a card, then the work at the backend is zero. We have a work done principle for how much the telecom operator A pays to operator B, as termination charges. This is computed in terms of work done.”

The interconnection charges regime in payments allows for interoperability between telecom operators, but also benefits the larger operators, because the operator whose customer is receiving the call would be paying the operator whose customer is making the call. If you think about it, in terms of incentives, this essentially encourages a telecom operators to push customers to make more calls. Extrapolate it to a payments scenario, and such a regime would push payments companies to try and get their customers to make more payments than acquire, and thus could help drive costs down. That’s a interesting suggestion from the TRAI Chairman, though there are people calling for MDR to be made zero.

Also read: Anand Raman on other models in “Cash needs to lose this battle“.

Other excerpts from RS Sharma’s session at the summit:

On Aadhaar being made mandatory (in response to a question): “On the first issue, UIDAI, their position is that it is voluntary enrolment. However, it is also true that the govt, through the Act, now law, they may make these services mandatory, because of the purpose of giving subsidies. If I’m giving subsidies to you, I need to know whether you are you, and not more than one person is taking subsidies. The identity-related questions are around duplicates and fakes, and identity establishment.

I think there is nothing wrong in government making the Aadhaar number mandatory, if you want to draw benefits from the government. There are huge leakages which take place. Today the govt spends Rs 500,000 crores per annum on direct subsidies. A conservative estimate is a minimum of 10% of this is leakages. It is in the interest of the government that there is no duplication. Aadhaar provides a unique identity.

On Privacy: “My own take is that Aadhaar has design privacy as the basic tenet of its design principles. Privacy by design was adopted from the beginning itself. There are multiple things: Aadhaar is a random number. By a number, you can’t profile any person. Aadhaar collects minimum information: name gender, age and communication address. Each authentication is informed by email and SMS. Aadhaar does not know anything about what kind of transaction. It doesn’t know how much money is transferred to you. Thereby the domain data is with the domain entity. Aadhaar only has logs of your identity authentication. Aadhaar has privacy by design incorporated by design. To say that Aadhaar violates privacy is wrong.”

On Network neutrality: “Why is it important? We should understand that Network Neutrality is important in our country so that the Internet can become an open platform, you should have the freedom to get on to the internet. That equality should remain. If you fiddle with the internet as an open platform, you’ll be running around the pipe providers.”

The Digital India Plan: “It has three broad areas. The first is digital infrastructure, which is what I work on. And then there are other types of soft infra like digital identity, payment system, payment gateways. The middle layer is software and services on demand, and India has done great in terms of developing the whole stack. The third area is digital empowerment of people. Even if you have software and services, and people use this software and services, things will not take place.” The Digital India plan also “defined 9 pillars which talk about what are the quantifiable objectives for each of these vision areas. The first pillar was broadband as a utility. Everything will ride on connectivity infrastructure.

Need wireline Internet in India “When we look at the international comparisons, the fixed line broadband infra, India fares poorly even in comparison with Vietnam, Malaysia, and Indonesia. When the mobile revolution took place, we leapfrogged from wired to wireless. We forgot about telephone connections. We have less than 20 million broadband connections. My belief is that unless we have fixed line connectivity, our needs won’t be fulfilled. If you want the entire development agenda riding on connectivity, education, health, IOT, you need to have robust highways of things.

On Internet access in rural India: NTP 2012 talked about affordable Internet. We are really not there as yet.  We as a regulator, are not implementers. We have been providing policy advice to the government. We’ve done four things:

1. BharatNet should be in a PPP model. We believe that Aadhaar became successful because of alignment of interests. Everyone in the value chain, everyone was interested undoing more and more enrolments. We need to create a situation where individual entities become stakeholders in BharatNet. That consultation we did for a wrong time.

2. The second recommendation which we made is that, while we didn’t have fixed line infrastructure, there is another infra which has come about, which is digital cable TV. India is a country which has digitized the entire came network. So you have 100 million digital cable TV homes. These, with a little upgradation can be utilized for delivering broadband. 100 million houses will deliver to 500 million people. This is how the world consumes internet. This is how it is delivered in America and Europe. Policy taxation constraints should be removed. We should leverage these pipes.

3. The third is that NTP2012 talked about an open sky policy. We don’t get bandwidth from satellites. Satellite data cost (in India) is 400 times that of America because of policy. Users cannot directly negotiate directly with satellite providers.

4. Lastly, whatever the level or progress we believe in the community model of public wifi networks, where a grocery shop sells bandwidth on his hotspot. Because it’ll be able to sell goods also. If there’s no data, you can’t do transactions of the UPI side. What is required is an architecture where this person who is proving WiFi hotspot should not be burdened by customer authentication, money collection etc. We’ll do a proof of concept to see that a person can get seamlessly on a wifi hotspot without OTP etc. It should be easy to latch on to it wherever you go, and there is a hotspot.

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