New Umbrella Entity (NUE) – Futuristic, Strategic and Disruptive

Credit card payment, buy and sell products & service,selective focus

Sometime back RBI issued Draft Framework for authorisation of a pan-India New Umbrella Entity (NUE) for Retail Payment Systems and invited application from interested participant under the draft framework. Many of the Global and Indian Conglomerates have applied in Joint Venture.                                                          

According to retail payment statistics on NPCI Platform, there has been a jump 776% jump in the volume of transaction between FY 2014-15 (4,403 million transactions) to F.Y 2021-21 (38,578million transactions). Whereas the volume has doubled during the period (INR 76,111 billion in FY 2014-15 – to INR 1,45,626 billion in F.Y 2021-21).

Futuristic: RBI framework for enabling wider participation in the retail payment market will help in transforming the markets in various ways. It will not only make it oligopolistic and mitigate the concentration risk, but may also strengthen the payment ecosystem in various ways. This decade may be defined as a Fintech decade in the years to come and given India’s demography, retail payment may surge multiple times through inclusive policies and technologies. The foundation of Indian retail payment industry will also pave the way for future of Institutional payment in the Country. New entities in the payment architecture may bring innovative technology and change the way in which settlements are happening today.  RBI draft framework makes it clear that one of the core responsibilities of the NUE will be not only to set-up, manage and operate new payment system but also settlement systems for participants. It may be not unreasonable to assume that NUE may ultimately evolve with the technologies for integrating the future version of digitised money, further assuming that India will catch up with Global race on digitised money trend.

It may not be over optimistic to presume that experiment with the NUE will be used to transform the the financial market infrastructure. Further few of the off shoot/derivative of the experimentation with NUE, may be the platforms that may offers enterprise-grade blockchain tools, Interbank Information Network, and many other commercial applications e.g. Stock Exchange Clearing & Settlement mechanism.   

Why its Strategic – Some phenomenal developments are happening in Global Payment Architecture. Many of the Global Financial Institutions are joining JPMorgan Chase network for using cross border payment facility. Recently in India, State Bank of India has signed up with JP Morgan‘s for availing Liink platform. Liink is a peer to peer network that allows easier integration and enables financial institutions and corporate users to make secure, peer-to-peer data transfers with greater speed and control. It is hard to believe that the decision for SBI to Join the network, may have been purely independent and on commercial ground, without permission from highest echelon in the policy maker as it portrays a symbolic challenge to SWIFT. Nation which controls the cross-border payments, will eventually control the global financial order. What we are seeing is just the unfolding of some key events, forming part of some bigger picture where Digitised asset will eventually overthrow the hard assets and so may be the associated cross border settlement platform i.e SWIFT.

If we link the Government decision of floating NUE in India through private tech players, we can get a clue that such a development requires best in class financial technology and visionary leadership to keep pace with the global development. Further such a platform will qualify as a critical and strategic asset of the country, which makes it imperative that consortium of credible industry player from India as well as strategic and friendly country shall be allowed to operate the platform.  Interesting times Ahead.

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