What a Technology And Payments | Questions RBI’s caution against sRide poses

 What could the riders have done differently? The RBI adds that the people should not just ‘exercise utmost caution’, but also verify on their own before parting their money with authorised platforms. But how do we expect people to know which platform is authorised, or not? In its list of payment operators, the RBI has classified six kinds of payment providers: functional, revoked, ceased, voluntary surrender, cancelled, and are in the process of cancellation. How will the public understand these six categories? Given the above set of issues, two broad ideas emerge which need a rethink from economists and policymakers. First, it is curious to note how these wallets are creating new forms of digital money. Technology has not just made it easier to make wallets and usher digital payments, but to also create money. Students of economics study how stock of money is measured via indicators named as M1, M2 and so on. The M1 is called as a narrow measure of money which comprises currency and demand deposits. The broader forms of money from M2 onwards include post office deposits, time deposits, and so on. As wallets also are nothing but deposits which are then used for payments, should they be included in money stocks too? The IMF economists in a study point out that most jurisdictions have regulations which ensure mobile money is part of the banking system. However, there are some countries where mobile network operators (MNO) act as ‘niche financial intermediaries’ that invest deposits in sovereign securities, and other approved assets. In case of such MNOs, mobile money liabilities need to be collected and made part of broad money. As mobile wallets and payments proliferate, should we rethink the traditional methods of measuring money? Second is the need to relook at financial regulation. Financial regulators are caught in this dilemma between whether to allow technology or to tighten regulation. If they allow technology to evolve freely, then we will see more cases such as sRide. If they tighten regulations on technology, then innovations will suffer. Regulators such as the RBI are taking a middle path which allows technology but at the same time warn the users as and when cases are reported. Is there a need to rethink how financial regulation is dealing with mobile money and digital payments in general? As of now regulation is exclusive that is those who seek authorisations are allowed to offer payment services. Instead, should the regulation be inclusive which allows all such companies to offer wallets with regulation coming in picture only in case of wrongdoing? To sum up, the sRide case raises several questions on the role of technology in the payments space. The challenge is not limited to payments alone, as we are seeing similar players emerging in the currency exchange, stock trading, and so on. Now whether regulators and their regulations treat these trends as an opportunity or a challenge is to be seen. AMOL AGRAWAL is To sum up, the sRide case raises several questions on the role of technology in the payments space. The challenge is not limited to payments alone, as we are seeing similar players emerging in the currency exchange, stock trading, and so on. Now whether regulators and their regulations treat these trends as an opportunity or a challenge is to be seen. at Ahmedabad Univercity To sum up, the sRide case raises several questions on the role of technology in the payments space. The challenge is not limited to payments alone, as we are seeing similar players emerging in the currency exchange, stock trading, and so on. Now whether regulators and their regulations treat these trends as an opportunity or a challenge is to be seen.To sum up, the sRide case raises several questions on the role of technology in the payments space. The challenge is not limited to payments alone, as we are seeing similar players emerging in the currency exchange, stock trading, and so on. Now whether regulators and their regulations treat these trends as an opportunity or a challenge is to be seen.Regulators such as the RBI are taking a middle path which allows technology but at the same time warn the users as and when cases are reported. Is there a need to rethink how financial regulation is dealing with mobile money and digital payments in general? As of now regulation is exclusive that is those who seek authorisations are allowed to offer payment services. Instead, should the regulation be inclusive which allows all such companies to offer wallets with regulation coming in picture only in case of wrongdoing?