Your Cheque Payments to Get Safer Via ‘Positive Pay'
Listen to Your Cheque Payments to Get Safer Via ‘Positive Pay'
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On the backdrop of the coronavirus pandemic, the Reserve Bank of India (RBI) has been keeping tabs on the credit environment. But apart from the potential rise in Non-Performing Assets (NPAs), another topic has drawn the banking regulator's attention lately.
Ever since the breakout of novel coronavirus pandemic, instances of financial frauds and cyber frauds are on the rise --in India and globally. Even otherwise, cases of banking sector frauds through counterfeit cheques and withdrawal of money through unscrupulous means is not new in India. Taking a serious note of this, RBI recently announced its plans to launch payment safety features under a mechanism called 'Positive Pay'.
All cheque payments of value Rs 50,000 and above will be cleared through 'Positive Pay'.
What is 'Positive Pay'?
'Positive Pay' is a mechanism within CTS (Cheque Truncation System) that will help detect frauds by cross-verifying details of cheques provided by the issuer and presented by the counter-party. There wasn't any precedent of this system in India. Only ICICI Bank launched this feature voluntarily in June 2016 for its customers through its iMobile application.
How 'Positive Pay' works?
After issuing a cheque, a customer of the bank feeds in cheque details into the bank's mobile app. The information includes cheque number, cheque date, payee name, account number, and amount among others. Moreover, the issuer is required to upload the image of both sides of the cheque.
If the clearing system finds any discrepancy in the copy of the cheque received and the information provided by the issuer, the cheque will not be honoured. It is referred back to the issuer for further clarification. This usually delays payment by a day, as the rectified information is available with the bank only after a day.
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Will 'Positive Pay' leave a positive impact on India's payment system?
'Positive Pay' is expected to cover nearly 20% of total cheques issued in terms of volume and 80% in terms of value.
The announcement of positive pay is in line with RBI's objective of developing a world-class payment and settlement system that is not just safe and secure, but also which scores high on speed, efficiency and affordability.
On May 15, 2019, RBI issued a vision document titled Payment and Settlement Systems in India: vision-2019-2021. Therein, the banking regulator envisages enhancing the security and efficiency of the present CTS mechanism given that cheques continue to be an important payment instrument for high-value payments. Currently, under CTS, the average value of cheques cleared is Rs 82,000. Thus, it expected that 'Positive Pay' will enhance the security associated with cheque payments. Soon the RBI is expected to issue guidelines and clarifications on the operation framework.
But whether 'Positive Pay' would also improve customer experience; largely depends on the age profile of a bank customer and his/her tech-savviness. Also, the experience of a customer may differ from a bank to bank.
'Positive Pay may not necessarily go down well with senior citizens who are not tech-savvy. Likewise, beyond metros, the said system may find some teething issues initially.
Banks will need to invest in technology to make a positive impact with 'Positive Pay'. And for 'Positive Pay' to be well-accepted by clients of banks, the user experience will be crucial. Smaller banks and co-operative banks, who have not invested adequately in technology, may find it a challenge to offer the best customer experience.
Through 'Positive Pay', the silent message passed on is: start using mobile banking. This could perhaps serve the objective of improving the popularity of digital payments.
The overall growth of cheques as a preferred payment instrument is dying slowly. According to RBI data, CTS witnessed a contraction of 2.6% in volume in FY 2018-19, although there was a marginal growth of 2.3% in value terms.
On the other hand, digital payment options such as IMPS (Immediate Payment Service) and NEFT (National Electronic Fund Transfer) have been thriving. In FY 2018-19, IMPS witnessed 73.6% volume growth, aside from having seen a growth of 99.3% in FY 2017-18. And the growth in terms of value also has been very encouraging-78.2% in FY 2018-19 and 117.1% in FY2017-18.
During lockdowns, the adoption of digital payment options is likely to have gone up substantially. Before the lockdowns were imposed a large section of society was averse to buying grocery online, but when left with no other option, consumers slowly opted to shop online. This reflects on the jump in e-commerce sales.
We can expect a similar wave of change in payment preferences too in the future. 'Positive Pay' has sent out a clear message: use digital payment options for high-value transactions. And if you still want to go with the conventional system of issuing cheques, follow safety measures using 'Positive Pay', which is in the interest of banks and customers.
Warm Regards,
Rounaq Neroy
Editor, Daily Wealth Letter
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