India has arrived. Compared to many other countries where electronic payment systems are still evolving, we are proud to have been gifted a state-of-the-art IMPS – Immediate Payment Service which allows any Indian with a bank account to transfer money to any other Indian with a bank account at any time of the day using almost any kind of device be it laptop, smart phone, feature phone etc.
Power-users of Online Banking who have been using NEFT for several years have started to adopt IMPS since it gives them the power to transact anytime using any mobile phone.
About two years ago, when IMPS Merchant Payments were announced, I decided to pay my Vodafone mobile bill using IMPS. The merchant’s MMID and mobile number was published. I enabled Mobile Banking, downloaded the Mobile App, used IMPS and made the payment. The money was transferred to the Vodafone bank account of Citibank instantaneously. End Customers who have used IMPS can vouch for the real-time nature of IMPS Payments. They also get a sense of assurance when they get the confirmation SMS along with the IMPS Reference Number. This can facilitate tracking of the payment if need be.
The next month when my Vodafone bill came, the earlier payment using IMPS was not reflecting in the bill. It was then that I realized that I had completed my part of the job of “paying” the bill. But I had not informed Vodafone that they need to “accept” the payment. So, while there is an onus on “A” Party to make the payment, there is also an onus on “B” party to receive the payment. If “A” and “B” parties do not handshake, the “banking” transaction would be successful, but the “accounting” transaction would still be incomplete.
So, why is there a need for a separate “accounting” transaction? Will my responsibility not end by just transferring the money to the merchant ? Perhaps, No. This is because this payment is to be made against a specific invoice which has been issued by the merchant. So, it is necessary that the payment has to be made with reference to a Demand Note or an Invoice. This brings to the fore, the importance of ‘Payment Instruction’ or PI. Unless Payment is accompanied by a Payment Instruction (PI), the transaction is not complete.
Many years ago in telecom, we had a similar problem. When a call had to put through to my brother from Bangalore in India to say Florida in US, we had to connect several telephony circuits along the path through multiple exchanges and then finally reach the last telephone circuit assigned to my brother. If my brother’s telephone was busy, then the call could not be put through. The reservation of telephone channels along the entire path was completely wasted just because the end terminal was not available. Since my brother was unable to take the call, the end-to-end call failed and a re-attempt had to be done. If my brother was aware that the call will come through, he would have kept the phone free and ready to receive the call. This situation led to the evolution of SS7 Signalling, a landmark technological milestone in the history of Telecom. SS7 made it possible for the signalling to be sent a priori in a different path right upto the end-point. If end-point was available and ready to accept the call, then the telephony path for the conversation would be reserved for the voice path.
Taking a leaf from the telecom World, one approach to successful, scalable and large scale payment system design is to set-up a path for the Payment Instruction (PI) to be sent a priori to the parties involved in accepting the Payment. Once PI has been accepted by the Payment Network, then if and when the payment happens, all the parties would be informed and they will do the necessary action to complete both the ‘banking transaction as well as the ‘accounting’ transaction. So, my Vodafone payment to Citibank would have been used for my mobile bill payment thereby avoiding any penalty, interest or disconnection of service.
The next evolution in Electronic Payment will be to create different innovative ways of creating the Payment Instruction (PI) to different people and to different merchants using different attributes such as Bank Account Number, Mobile Number, E-Mail Address, Aadhar Number, Debit Card Number, Facebook ID, LinkedIn ID, Twitter handle, Car Registration Number, SmartWatch Device ID. Every connected device shall have some identity and this could be used to reference the party who is making the payment. Party B can accept or refuse the Payment Instruction received in various forms using various channels using various identifiers. Once the Payment Instruction is accepted, merchant payments can flow through. Adopting standards for Payment Instructions will help grow the industry multi-fold and increase adoption of Electronic Payment by the masses.
Mr. Chandrashekar Rao has over two decades of experience in Telecom, Software and IT Product Development. He is an M. Tech in Communication Engineering from IIT, Mumbai and is a specialist in Mobile Banking product development & delivery.