New Delhi: Aruna Sundararajan is a senior hand at public policymaking with experience in investment promotion, infrastructure projects and digital connectivity in rural areas. As secretary in the ministry of electronics and information technology, she has to tackle formidable challenges in India’s effort to move to a cashless economy. Sundararajan spoke to Mint on how the government is tackling the hurdles in its pursuit of a making the economy less reliant on cash. Edited excerpts:
How hard is it to get people in rural areas to switch to digital payments?
We have already moved from the awareness creation stage to one where people are actively trying out electronic payment options. The common service centres (CSCs) set up by the ministry are spearheading this campaign. We launched the drive with a target of digitally educating 1 crore rural citizens, which meant that people ought to know as consumers what all payment options are available to them and what is best suited for them. The response in the last one week has been phenomenal. Over 38 lakh rural citizens and 120,000 merchants have already enrolled for digital payments.
The programme also seeks to educate merchants. Most people have a desire to make the switch because of the convenience it offers. If we remain stuck in the card and point of sale paradigm, we cannot achieve scale in electronic payments. We had to move away from this paradigm by adopting new technologies which are simpler to use.
In mobile banking, there is no requirement for having separate infrastructure for fund transfer and acceptance since mobile phones are widely used. India also has the unique advantage of having a large biometric footprint. We are developing a set of digital payment options around Aadhaar. With people becoming more familiar with these options and technology becoming simpler, acceptance level will go up. Adoption of digital payment methods by 38 lakh people in such a short period is a little difficult to explain unless there is a certain appetite for it in the population. A massive disruption is set to take place in the market. One may expect even bigger players like Google or Facebook will get into this space. Mobile banking led by telecom service providers such as Airtel Money, JioMoney, Vodafone m-pesa are also there.
About 240 million Indians have either no electricity or have only intermittent supply of power. Internet data access even in cities is problematic at times. Also, there is the issue of security of sensitive financial information. How are you going to deal with all these challenges?
We need to address this. There are significant infrastructure challenges and no doubt, security is something we have to be ever vigilant about, because while technology grows fast, equally fast are the people who will look to exploit weaknesses. We have to constantly innovate even on the regulatory side.
We are seeing that today’s regulatory framework might not be enough to deal with the new paradigm in payments that is emerging. We are looking at what needs to be done on the legal framework. The economy going digital will bring unprecedented changes. No one has dealt with changes of this scale at this speed.
We are definitely looking at the legal framework regarding security. The government believes that digital technology will open up a world of new opportunities, especially in a country like India, where so many are excluded. We are committed to ensuring that people do not get left out and the government has a big agenda in this area.
We have been continuously working on improving the telecom infrastructure. We will see a significant improvement in Internet access by the end of next year with an expansion in telecom network and fiber infrastructure.
Will it be correct to say that licensing of e-wallets and payment banks will rest with the Reserve Bank of India, while the legal and technical oversight of security will lie with the IT ministry?
We are looking at both legal and regulatory framework and we do think that there are areas which need to be strengthened and we will do that. The overall framework would lie with this ministry. When I say security, there are issues relating to data standards, privacy of personal data and policies relating to any electronic service provider. All these big policy issues will be governed by the IT Act, but it is not necessary that all of them have to be administered by the IT department. It can be that some of it will actually be done in practice by the RBI. If there are gaps in policymaking, then maybe both RBI and IT ministry will have to sit together and see to what extent these can be plugged. So, the overarching legal framework is the IT Act and the (Electronics Service Delivery) Rules, 2012, but how it applies to the particular domain of digital payments, it is being governed by RBI.
The chief minister’s panel on digital payment systems recommended interoperability of banks and wallets. When will we see this happen?
What has been decided for now is that bank wallets can be made interoperable. In the next phase, we will look at making other wallets interoperable. Bank wallets are backed by a solid regulatory framework of RBI. When they offer all the security and sanctity attached to a bank account to a wallet, they are made interoperable. Over-the-top players operate in a different framework of accountability and liability. RBI will decide when to make it interoperable.