Interoperability of Digital Payment Systems For Internet Banking in 2024

March 5, 2024

GS Paper III Indian Economy

Context:

Recently the Reserve Bank of India (RBI), for quicker settlement of funds for merchants, has asked NPCI Bharat BillPay Ltd. (NBBL) to implement an interoperable system for Internet Banking.

Current Mechanism: According to the current mechanism, banks are required to separately integrate with each payment aggregator (PA) of different online merchants.
Integration: Given the multiple PAs, each PA needs to be integrated with each of the banks.

What is Interoperability of Payment systems?

Interoperability refers to the capacity of different payment systems to work together, enabling customers and providers to conduct transactions between systems without requiring complicated integration or multiple accounts.

Features of Interoperability

Technical Standards and Protocols: Technical standards and protocols are the foundation of interoperability, allowing disparate systems to comprehend and process information from one another. Data and transactions can be sent without mistakes or interruptions because of this compatibility.
Smooth Transactions: Interoperability allows consumers to perform transactions across many payment systems smoothly.
- For example, it enables a user of one bank’s payment app to send money to another bank’s payment app with no hassle.
Enhances Efficiency: Interoperability improves efficiency by eliminating the need for duplicate efforts and middlemen. It improves processes and simplifies interactions for both service providers and end users.

Bharat Bill Payment System

About: BBPS is a platform that serves as a link between different billers and users, or an integrated bill payment system.
Compatibility: It is a one-stop ecosystem that offers all consumers in India a reliable, secure, and consistent “Anytime Anywhere” bill payment service that is compatible with several payment systems.
Stakeholders: The National Payments Council of India (NPCI) is the parent organization of BBPS, which was developed by the Reserve Bank of India in 2013.

Components

Bharat Bill Payment Central Unit (BBPCU): The NPCI, which establishes the guidelines and standards for BBPS, is the BBPCU.
Operating Units for Bharat Bill Payment (BBPOUs): BBPOUs follow the guidelines established by BBPCU. The entities that manage the payments load are the banking and non-banking ones.

Also Read: Penalty On Paytm Payments Bank Ltd by the Financial Intelligence Unit-India (FIU-IND)

News Source: The Hindu

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