The Reserve Bank of India (RBI) has announced that it is planning to build a new digital payment system that will function with minimal infrastructural requirements and allow digital payments even during times of crises.
What is LPSS?
Called LPSS, Lightweight and Portal Payment System, the digital payment system was first mentioned in RBI’s Annual Report. The new system is expected to be markedly different from the existing systems, which it will require to be to fulfill its primary objective of not stopping digital payments in any circumstances – not even natural disasters or wars.
We believe that this system, once it is put into place, will go a long way in making digital payments achieve the wider reach around India that RBI has always aimed for.
The Har Payment Digital campaign
Back in March this year, Mr Shaktikanta Das had launched the “Har Payment Digital” campaign as part of The Digital Payments Awareness Week. The goal of the campaign, as is obvious from its name, was to make digital payments the norm across India.
You and me, the ones who live in urban India, are probably now habituated to digital payments. We whip out our phones to scan a QR code and make a UPI payment as if it's second nature to us. From buying that latest TV or the fanciest set of clothes to coconut water from a roadside vendor, we pay digitally with so much ease using either our cards or our phones.
Digital payments have a long way to go
But that is still not the case in other parts of the country. According to RBI’s own survey of 90,000 people, 35% of the respondents said that they were aware of digital payments but don’t use them. What might sound even more shocking is that 23% weren’t even aware of digital payments. Yes, 23%!
As you can imagine, digital payments still have a long way to go in India. Of course, RBI understands the concerns that Indians have around adapting digital payments. One of the major concerns being that digital payments aren’t always reliable – what if they don’t go through?
This, of course, is something that RBI doesn’t want to happen, especially not in a situation of crisis. Which is where LPSS comes into play.
How will LPSS work?
LPSS is planned to be made available on a “need basis”. We’re not exactly sure about the mechanics of LPSS as yet; we’re looking forward to learning more about it from RBI in the coming future, but we do understand that LPSS will be compatible with the payment platforms available today.
As per RBI’s repprt, LPSS will be developed as a lightweight and portable system to “ensure near-zero downtime of payment and settlement system in the country and keep the liquidity pipeline of the economy alive and intact by facilitating uninterrupted functioning of essential payment services.”
LPSS is also expected to work for bulk payments, interbank payments and provision of cash to participant institutions.
While we commend RBI’s vision in looking to build something like the LPSS, the larger question remains around the infrastructure that LPSS will work on. The system is expected to have minimal hardware and software so that it works in every type of situation, which will help in enhancing consumer trust in digital payments.
Of course, no one wishes any crisis situation on the citizens of our country. Buit given the times we live in, it is best to stay prepared for such situations. And RBI’s vision to make sure digital payments don’t fail when people would need them the most is exemplary.
Here’s hoping we see more on LPSS soon.
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