Intermediaries in e-payment space need tobe monitored better

The Reserve Bank of India is planning to review the surveillance mechanism for intermediaries in the e-commerce arena due to their growing importance.

The intermediaries provide a platform for acceptance and processing of payments across multiple electronic payment channels. They offer payment aggregation services to a large number of businesses (small to large), governments, utilities, banks, insurance companies, etc.

The intermediaries act as payment aggregators by obviating the need for a merchant/organisation to set-up and manage a multiplicity of relationships with different financial institutions — banks, networks, wallets, prepaid issuers, and so on, for accepting payments.

“Over the years the volume and value of transactions handled by the intermediaries have grown manifold. Reportedly, there are the intermediaries who handle daily volumes of 6-7 lakh transactions amounting to Rs 150-200 crore,” said G. Padmanabhan, Executive Director, RBI.

FOCUS AREAS

Some of the areas which need attention are: the need for intermediaries to provide complete and transparent information to the customers on the success/failure of transactions; uniform and standard practice for refunds to the customers for failed/cancelled transactions; and related customer-service issues.

Another area of concern is the operational risk that such entities may pose. As the customers, merchants and financial institutions depend on the intermediaries for payments/collections, any disruption can negatively impact the payment system, said Padmanabhan in his address to the Bankers’ Club at Thiruvanathapuram.

While some of the big merchants have “substitutability’ or “interoperability” arrangement in the form of payment gateway switching system, others fully depend on one intermediary. This underscores the importance of the operational risk being effectively addressed by the intermediaries.

Padmanabhan observed that the need to continue with the existing light-touch regulations vis-à-vis a focused oversight, including authorisation for such of those entities which have a significant presence in the market, would need to be explored.

Further, the intermediaries perform certain niche functions which may not qualify to be part of the core businesses of banks.

When specialisation and efficiency are existent, it would be appropriate to allow such intermediaries to play their roles, but with the added covenants relating to safety, business continuity, risk reduction and sustenance.