Payment systems benchmarking report published: Payment acceptance infra needs improvement, says RBI

Despite India’s leadership in large-value and quick payment schemes, there is room for improvement in payment acceptance infrastructure, the Reserve Bank of India (RBI) said in a report.

The India Payments Benchmarking report released on Friday provides a comparative position of the payments ecosystem in India compared to other major countries. Benchmarking of the 2020 position has shown that ATM and point-of-sale (PoS) terminal penetration needs to be improved.

Although the number of people served by a PoS terminal improved from 426 people per terminal in 2017 to 296 people in 2020, the number is still the highest among the 21 benchmark countries, the report said. The number of POS terminals in India increased from 3.08 million in 2017 to 4.59 million in 2020 and has grown at a CAGR of 14%.

“The nationwide availability of payment acceptance infrastructure can be measured by considering the people served by a single PoS terminal. In order to ensure the deepening of digital payments, it is imperative to increase the density of acceptance infrastructure across the country,” RBI said in the report.

In order to address the supply-side issues in acceptance infrastructure and to give impetus to the deployment of PoS terminals, RBI operationalized the Payments Infrastructure Development Fund (PIDF) in January 2021 with a focus on improving acceptance infrastructure in rural areas. As of the end of March 2022, 9.1 million digital payment acceptance devices and 0.39 million physical payment acceptance devices had been deployed under the PIDF program.

India’s performance in terms of currency in circulation (CIC) per capita took a hit, rising from $218 in 2017 to $288 in 2020. CIC per capita gives an indication of the use of cash, and a lower level implies a better migration to digital payment methods.

The RBI attributed the increase in CIC per capita to people’s tendency to use cash as a store of value during the Covid pandemic. “A high level of CIC does not necessarily indicate the use of cash for payment transactions and may represent the use of currency as a store of value. This is evidenced by robust demand for higher-quality currencies across jurisdictions,” the central bank said.

Of the 40 indicators used in the exercise, India was rated as ‘leading’ or ‘strong’ on 25, up from 21 in the previous round of the exercise, and as ‘weak’ on eight indicators, including 12 earlier. Since the last exercise, India has shown improvements in available digital payment options for bill payments, public transport ticketing systems, available cross-border remittance channels and a decrease in the use of checks, RBI said.