Interoperability of Digital Payment Systems For Internet Banking in 2024

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.

News Source: The Hindu

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