While talking about aiming to make payment systems cashless through four strategic measures, the Reserve Bank of India (RBI)'s vision 2018 documents falls short of making uniform the consumer charges as well as convenience charges levied by banks and merchants for similar services. Non-uniformality of charges is what leads to several grievances of banking customers. As pointed out by Moneylife in the past, banks have discovered that it is extremely easy to pick the pockets of depositors and customers to make them pay for a variety of basic services, because they are too disorganised to pose a challenge.
The Vision-2018 document released by the central bank focuses on four strategic initiatives like responsive regulation, robust infrastructure, effective supervision and customer centricity. RBI also talks about improving five broad contours like coverage, convenience, confidence, convergence and cost. "For coverage, we aim to enable wider access to a variety of electronic payment services. Convenience would be provided by enhancing user experience through ease of use and of products and services. Similarly, we will build confidence by promoting integrity of systems, security of operations and customer protection. Convergence would be achieved by ensuring inter-operatibility across service providers. We also aim to make services cost effective for both the users and service providers," the central bank says.
However, according to consumer activists, there is no uniformality on charges levied by banks for different services, like cheque clearance, usage of ATMs, and point-of-sales (POS) terminals. "Charges levied by some POS are as high as 2.5% whereas some POS do not pass on them to customers. Similarly, when it comes to using netbanking facility to pay any bill, MTNL gives 1% discount; BEST does the same thing but levies internet banking charge. Ticket booking through IRCTC is chargeable by some banks and not by other banks. ICICI bank charges for online National Electronic Funds Transfer (NEFT) while Bank of Baroda (BOB) and YES Bank do not. This one leads to consumer complaints which we all consumer activists have been facing for quite some time," says Abhay Datar, retired banker and consumer activist, who is associated with Moneylife Foundation's free helplines.
Meanwhile, banks are eliminating the convenience of their massive investment in core banking solutions (which promised anytime, anywhere banking) by dreaming up new charges. A senior citizen told Moneylife about how he was levied an ‘intercity charge’ of Rs50 for depositing cash in his own bank account in Bengaluru (not his home branch). A Moneylife reader was charged a fee to deposit cash in his own account. Reversing these charges requires a sustained battle, so most depositors simply give up.
According to RBI, all segments of electronic payments, particularly retail electronic payments, have shown healthy growth both in terms of volume and value of usage. For example, RTGS and NEFT volumes increased almost threefold between 2013 and 2016 reflecting greater adoption of the system by all segments of users. Similarly, with increasing number of banks offering mobile banking services and driven by the growth in e-commerce and use of mobile payment applications, the volume of mobile banking transactions has increased nearly seven-fold and the value of transactions has shown a steep rise. Card transactions have also grown significantly at both ATMs as well as at the POS with the growth in debit card usage at POS picking up significantly. The growth in volume and value of transactions using prepaid payment instruments (PPIs) issued by banks and authorised non-bank entities has also been significant.
The volume and value in Immediate Payment Service (IMPS) has also grown significantly with the development of the IMPS as a multi-channel system providing various options to customers to originate transactions. Cheque payments, on the other hand, are showing a declining trend in terms of volume as well as value between 2013 and 2016, the central bank says.
RBI says safety and security of payment systems and transactions is an important factor that helps in boosting the trust and confidence of the customers in using electronic payment mechanisms. It said, it has advised all banks to issue all new cards based on EMV Chip and PIN.
"Presently the ATMs in the country read and process the card transactions only on the basis of data contained in the magnetic stripe, even though the card may be a Chip and PIN card. With the roadmap in place for issuance of EMV Chip and PIN cards, the aim will be to ensure that all the ATMs in the country migrate to processing of EMV Chip and PIN cards on the basis of Chip data rather than magnetic stripe data," RBI said.
According to RBI, customer acceptance and usage of payment products provide one half of the required network effect in payment systems with the other half coming from the entities willing to accept such payments. It says, "Confidence, convenience, and cost are key aspects that will encourage wider customer adoption and usage of electronic payments. Customers' increasing expectations are driving provider responses. Towards this end, Vision-2018 would strive to keep the customer interest at the centre of payment system policy actions."
The central bank aims to strengthen customer grievance redressal mechanism, enhance customer education and awareness, and protect customer interests.
Strengthening customer grievance redressal mechanism: A robust and responsive customer grievance redressal system is essential to build an environment of trust and confidence in payment systems. Further, customer experience should be uniform irrespective of whether the service is being provided by banks or non-bank entities. Hence,
i. The Bank would frame necessary guidelines to ensure that existing complaint redressal framework of authorised non-bank entities is improved, and that new payment systems are set up with appropriate mechanisms to address customer grievances in a proactive manner.
ii. Payment System Operators (PSOs) would also be required to adequately train their own front office staff and their agents to understand and appropriately address diverse requirements when servicing their customers.
Enhancing customer education and awareness: Customer confidence in payment systems is reposed with usage combined with better awareness of the product and processes. A well informed customer base would also facilitate faster migration away from cash payments.
Involvement of stakeholders in this exercise can help to reap greater benefits, and, as such, the Bank would collaborate with other stakeholders in creating an environment of awareness and education on e-payments. Hence,
i. The Bank, in collaboration with all the stakeholders, would endeavour to enhance customer awareness through structured Electronic Banking Awareness and Training (e-BAAT) programs.
ii. Further, the Bank would prepare a framework requiring PSOs to transparently disclose all fees they charge as part of their service along with the applicable terms and conditions, including liability and use of customer data.
Protecting Customer's interest: The Bank would encourage payment system providers to adopt best practices for protecting customer interests, by putting in place robust fraud and risk monitoring systems. In addition, a regulatory framework to limit customer liability in case of unauthorised transactions would be put in place.
RBI also talks about making available positive confirmation for RTGS transactions, similar to NEFT payments. NEFT system has the feature of sending positive confirmation to remitters regarding the completion of the funds transfer, thus giving an assurance to the remitter that the funds have been successfully credited to the beneficiary account. "In order to provide the same confidence to customers using RTGS system for funds transfer, the Bank will incorporate the feature of positive confirmation for RTGS transactions too. Further, the feature in the NEFT system will also be strengthened by ensuring that all banks send the confirmation in a timely manner," it added.
"Leaving aside the internal aspects like infrastructure and mechanism, the overall approach of the said vision appears to be consumer friendly," Mr Datar says.
Payment & Settlement Systems in India: Vision-2018
Building best of class payment and settlement systems for a “less-cash” India through responsive regulation, robust infrastructure, effective supervision and customer centricity...
Effectively, the so-called free service of auto debit comes at a heavy cost to the customer. If the payments of all the customers are aggregated, banks make a neat pile of money from this ‘advance’ collection. And the service is camouflaged as ‘free’.
Can someone explain why banks do not:
debit the customer’s account on the due date when they were doing so in the pre-computerisation days?
allow the customer the facility of choosing a date of payment that is x days before the normal due date so as to give him the benefit of the discount?
Once upon a time, in the eighties and nineties, when the computer systems were not as sophisticated as they are today, utilities payments were debited to the bank account of the user exactly on the due date through ECS. Today, if any bank account holder opts for ECS or an auto debit to his account, the amount is charged to the account anywhere between four to seven days before the due date, depending upon the bank and the payment gateway. Moreover, there is simply no option to make payment through either of the modes on the prepayment date where the utility offers a discount for early payment. In the case of MSEDCL, the discount works out to a hefty 34% per annum (if payment is made eleven days before the normal due date) which the banks happily deprive their ‘customer’ of, even as they charge almost as much for delayed credit card payments.
Effectively, the so-called free service of auto debit comes at a heavy cost to the customer. If the payments of all the customers are aggregated, banks make a neat pile of money from this ‘advance’ collection. And the service is camouflaged as ‘free’.
Can someone explain why banks do not:
debit the customer’s account on the due date when they were doing so in the pre-computerisation days?
allow the customer the facility of choosing a date of payment that is x days before the normal due date so as to give him the benefit of the discount?
The difficulty of closing accounts in one bank and opening account in any bank is now not so difficult if one is a genuine customer.