Raghuram Rajan says 'Lets Talk Payments' and India listens to the new RBI chief. It doesn't come as a surprise when Raghuram came to address media as RBI's new governor today and talked a lot about Payments. He has a great foresight which came to be acknowledged globally when in 2005, at a celebration honoring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan almost predicted a financial disaster.
This foresight and analysis goes to his prolific profile and career that includes education at institutions such as IIT, IIM, MIT and now a distinguished service professor of Finance at Booth School, Univ. of Chicago, his tenure with IMF as a Economic Counselor and Director of Research, president of the American Finance Association, Chief Economic Advisor to FinMin and his association with global Fintech world.
Statements of great interest today at RBI governor media meet were:
- Discussed about a Giro-based bill payment system where households can pay utility bills, school fees etc anywhere and at any time.
- Discussed about increasing White-label ATM's pan India.
- Discussed about Pre-paid cards which will be used for remittances and cash payments along with Aadhaar.
- Discussed that RBI will also explore mobile-based payments where encrypted SMS can be used for fund transfers and mobile payments across telecom service providers and handsets. RBI will set up a panel for mobile payments for this.
LTP View: RBI has done significant work in setting the roadmap and agenda for payments in the country. Government backed NPCI is doing great work and brought IMPS. Work done by RBI around Prepaid card licenses and defining mobile money transfers and limits has been taken well in the country. But with Payments gaining a lot of importance with this announcement, could bring some fresh developments for companies involved in this space.
White-label ATM's would mean suppliers of ATM hardware and software and connectivity would have good demand. Linking Aadhaar and Prepaid could lead to a new set of startups and larger companies trying to innovate in this space. Prepaid cards are already quite popular with unbanked and underbanked masses for bill payments and recharges.
Mobile payment companies working on peer to peer and merchant transfers could gain if the limits on transaction could be raised from current levels. We see a lot of innovative startups building their application and features on top of NPCI's IMPS.
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