Like any industry, the payments industry has responsible players and some who think it’s the wild-west, said WorldLine India’s Ramesh Narasimhan in an interview with MediaNama. “We need a self-regulatory body with teeth, that can take action against players and make them fall in line with the best practices,” said Narasimhan, who is the head of digital commerce at WorldLine India.
MediaNama recently reported that the Payments Council of India (PCI) is in the final stages of submitting an application to the Reserve Bank of India (RBI) for a license to operate as a self-regulatory organisation (SRO) governing the digital payments ecosystem. The PCI, which operates under the Internet and Mobile Association of India (IAMAI), will float a new not-for-profit entity that would serve as the SRO entity. Worldline India is a member of PCI.
In the last few months, as reports of payment frauds, predatory lending apps and data leaks at major payment companies came to the fore, the regulator has been signalling that more needs to be done to regulate India’s burgeoning fintech industry.
“The payments space is a magnet for venture capital. So you have a lot of people coming into the payments space and all operators need to follow rules and guidelines. And sometimes it is the established players that suffer as a consequence of this. One classic example is the RBI’s regulation which is withdrawing the ability of payment aggregators to keep a card on file from December 31, 2021. As a result, we have to move to tokenisation,” he said. Some players clearly miss out on looking at the risk component very seriously at the cost of growth, he said.
Edited excerpts from MediaNama’s interview with Ramesh Narasimhan, head of digital commerce, WorldLine India
MediaNama: Over the last year, we have seen both payment fintechs and gateway players report higher revenues and greater volumes of transactions flowing through their system on the back of a large increase in their user-base. A lot of companies have pivoted to new areas of growth, new products and are launching specific business services based on feedback from merchants and their needs. What are the new areas Worldline wants to get into given that merchants are looking to payment companies to be one-stop-shop service providers?
Narasimhan: We have seen many Indian merchants want to sell overseas and overseas merchants wanting to enter India. We think cross-border payments as the next big area for the Indian payments industry. We are investing substantially in this area and we are almost done with our development. Our major advantage as a global group is that with a single integration we can connect merchants in India to 175 countries, across 350 payment methods and process payments with 150 currencies. We will test out our platform with merchants in India and overseas pilots, once it is ready this quarter. Right now, we have regulatory permission for digital goods and services and as we go forward we will extend it to other goods, permitted we get approval.
MediaNama: The RBI recently extended the deadline for payment service providers to comply with the new rules on card storage and automated card payments. How will WorldLine implement tokenisation?
Narasimhan: There are parts to this. Firstly, as per RBI regulations you cannot make a payment worth more than Rs 5,000 with a second factor of authentication like a PIN number after September. Secondly, after September there will be new rules on recurring payments. And thirdly, from next January payment companies cannot store card data on behalf of merchants. These are all inter-linked because to make a standing-instruction (SI) payment off a card, you need to store card data. So first, as a customer you need to setup a new SI on your card for recurring payments after September. But even after a SI transaction on card can take place in September, in January this will stand cancelled since card data cannot be stored.
In India we have two operating companies, one is Atos WorldLine India which is a payments processing entity and the second, Ingenico epayments which is an online aggregator. Since we are a global company, we have many tokenisation solutions implemented across markets. So WorldLine will implement and host tokenisation service in India and Ingenico will use that for our payments. WorldLine will offer the tokenisation service to other aggregators so they can have access to it as well. Once this is done, SI on cards can become a reality. We will be ready with this service before the deadline.
MediaNama: Unlike many other countries India has a unique payments system with common rails and it has been extremely successful just in terms of growing financial access to people that were traditionally denied or ignored for various reasons, be it customers or merchants. Is India an outlier in terms of the kind of payment frauds? How does one address the problem of frauds problem, particularly in light of fraudulent lending apps?
Narasimhan: Payment frauds happen everywhere. In the western world, payments are very card oriented. In Asia, we have alternative digital payments mechanisms that have overtaken the cards. From a government perspective of digitisation and financial inclusion, our payments industry is a terrific success. But because we have a unique system, the kinds of frauds that take place are also unique. Payments operators need to be ahead of the curve and it’s a never ending catch-up game because vulnerabilities are there everywhere not just on an app, but across hardware and software.
At the first level, its about doing the merchant KYC properly and completing the due-diligence process. If your process is strong and you invest in an enterprise risk team, you will find red flags. I do not think the payments industry was manipulated, but that some players willingly on-boarded these merchants despite clear guidelines from the RBI. Growing at a break-neck speed leads can lead to these issues and you owe it to your merchants and customers to be extra careful.
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