RBI moots pre-paid cards for small online transactions

Reserve Bank of India deputy governor H R Khan on Monday said there is a greater need for collaboration between banks and the fast growing e-commerce firms, and suggested prepaid instruments as an alternative to avoid the two-factor authentication (TFA) process for small payments.

"E-commerce sites and banks need to integrate," Khan said in Mumbai, adding that at the time when the telecom sector was growing, there were similar problems, which were solved through collaboration.

On the mode of payment, where e-commerce companies have been asking for relaxation of the two-factor authentication process, Khan suggested use of prepaid instruments.

He, however, asserted that TFA system cannot be diluted.

"There should not be slip back (in TFA), but we will see which are the areas where we can do small payments. One of the areas is the near-field communication (NFC) technology with tap-n-go model. For e-commerce, we can have some tokenised approach or have prepaid card, which facilitates getting away from TFA," he said, adding that taxi-hire application Uber is already operating in a similar fashion.

In TFA, a user first signs into bank account and then keys in a one-time password received on the mobile phone to complete the transaction. However, the e-commerce firms feel this is a cumbersome process.

The RBI has made public a discussion paper, suggesting Rs2,000 as the limit for single-factor authentication but only using the NFC technology in a card payment transaction.

Khan said there can be various ways of collaboration between the banks and e-commerce players and added the RBI will not be averse to both of them forming joint ventures or the e-commerce players working as business correspondents to deepen financial inclusion.

Khan said the RBI is also in dialogue with telecom regulator Trai regarding the charge of Rs1.50 for completing an USSD-based transaction, and also discussing if bank SMSes can be given the priority when it comes to network usage. The Reserve Bank is also looking at expanding the Rs2-lakh limit on rupee-denominated prepaid card bought by foreigners for travel or stay in the country, Khan said.

Bharat Bill Payment System will be active in another year, he said, and asked the banks to enroll utilities or merchants for the same and added that the RBI has also received some applications for the bill discounting system.

He launched a prepaid card developed by the Axis Bank in association with business correspondent company Suvidhaa Infoserve, which will enable instant account opening using the Aadhar database and is aimed primarily for remittances, as well as using for ATM withdrawals and at POS terminals.

Axis Bank MD Shikha Sharma said the bank is still on the look-out for a payment bank partner, and is in talks with Suvidhaa Infoserve, one of the applicants for a payment bank licences.