Electronic Payments Revolution Hemant Adarkar Sachin Mandhare ASET colloquium May 13, 2016

Plan of our talk Historical Perspective ◦ SET protocol ◦ HTTP to the rescue ◦ Multi Channel and Cross Channel ◦ Mobile Digital Signatures ◦ What is a payment gateway Ground realities and trends

Challenges for customers and banks Traditional ways of payments ◦ Cash ◦ Clearing ◦ ECS ◦ SWIFT ◦ Credit cards Reconciliation

Brick and Click payments using Credit Cards Merchant Acquiring Bank Network Issuing Bank Customer’s bankMerchant’s bankEDC Machine

Information security Authentication Authorization Integrity of data ◦ Encryption/ Decryption ◦ Cryptographic Hash Functions Non-repudiation ◦ Digital Signatures

SET protocol Tunneling protocol Order information for the merchant Payment information for the banks Cumbersome due to the need of customer digital certificates

HTTP to the rescue HTTP is a stateless protocol HTTPS resolves all security issues except non-repudiation However, the ‘hyperlink’ property is magical

Non-repudiation Digital signature is the answer Easiest implementation is a Smart Card Mobile digital signatures circa 2000 Cross-channel/ Multi-channel Middleware Concept of an OTP

Payment Gateway Credit cards Debit cards Pre-paid cards Netbanking Concept of aggregators and wallets

New Payment Channels National Electronics Fund Transfer(NEFT) Real Time Gross Settlement(RTGS) IMmediate Payment System(IMPS) Cheque Truncation System(CTS) National Automated Clearing House (NACH) Bharat Bill Payment System(BBPS) Unified Payment Interface(UPI)

Hub and Spoke Architecture Central Hub Bank-A Bank-B Bank-D Bank-Y Bank-X Bank-C Customer

NEFT/RTGS Systems Hub – RBI System at Bank - Structured Financial Messaging System (SFMS) ◦ MQ based ◦ Asynchronous System is available between 9am to 7pm on working days NEFT < 2lacs RTGS > 2lacs

IMPS Systems Hub – NPCI System – ISO8583 based customized systems Available 24X7 Payments limit is set to INR Low transaction charges

CTS Systems HUB – NPCI System - Online image-based cheque clearing system TAT - 2 days No physical clearing Daily 32Lacs cheques are processed Bank has scanning solution and link to NPCI

NACH HUB – NPCI System – File Based Aim is to consolidate multiple ECS systems Making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension Bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium

BBPS HUB – NPCI Top 20 cities are generating INR 6,223 billion in bill payments every year and 70% of these transactions are still predominantly being carried out by cash or cheques – RBI Framework under development

UPI HUB – NPCI Unique ID – Underline protocol – IMPS Bank independent mobile application Not just Transfer but also Request

Thank You