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Title:E-commerce encroaching into banking space: RBI Dy Guv HR Khan

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“Reserve Bank has been authorizing banks/non-banks for issuing e-wallets/mobile wallets which is being used extensively for bill payment, recharge apart from e-commerce transaction. In fact, we are already at the stage, when the e-commerce has encroached in to the banking territory,” RBI deputy governor HR Khan had said in a speech in Hyderabad which was uploaded on the RBI website on Monday.

“The day is not far off when the banks would be viewed more as technology companies offering banking products and services. While this will be a new challenge for the sector, I see this as opportunity for banks to find new growth driver,” Khan said.

He said ICT (information and communication technology) backed payment system instruments are all set to occupy the retail financial space in a big way. “Take for example e-commerce business in India which is on a higher growth trajectory. Though initially it started with Cash-on-Delivery (CoD), net-banking, credit and debit card modes of payment, later on with the introduction of e-wallet/mobile wallet as an alternate mode of payment, the business has got the desired impetus,” Khan said.

CoD involved a cost for the e-tailers whereas consumers /buyers were probably having lack of trust in online transaction using net-banking, credit/debit card details. “Therefore, the wallet has emerged as a safe and secure mode of payment. Such wallets are vying for the space which was earlier occupied by debit cards,” Khan said.

The financial sector is witnessing a revolution in prepaid payment instruments (PPIs) with banks and payment firms in a race to launch mobile wallets, smart cards, paper vouchers, internet wallets, internet accounts and magnetic stripe cards. The RBI has reported a 169 per cent spurt in the value of PPI payments to Rs 21,342 crore in 2014-15 and a 118 per cent rise in the volume of PPI deals to 314.46 million in 2014-15.

According to Khan, in the recent past, the volume of electronic based retail payments as a per cent of total non-cash retail payments has been going up steadily, from 47 per cent to 55 per cent and further to 65 per cent during the years 2011-12, 2012-13 and 2013-14, respectively. The increasingly high volumes of banking transactions being routed through internet banking, mobile banking, usage of debit/credit cards, etc. by both sophisticated and technologically uninitiated customers forces banks to lay due emphasis on automated system for frauds detection based on advanced algorithms, rather than excessive reliance on manual process, Khan said.