The Reserve Bank of India (RBI) is conducting tests of an ‘On Tap’ retail payment application within its Regulatory Sandbox (RS), marking a significant development in India’s digital payment infrastructure. The initiative comes as part of the RBI’s broader push to strengthen digital banking security, which has included comprehensive security measures announced for 2024.
The ‘On Tap’ application facility lets entities test their payment solutions without being restricted to fixed application windows. The approach enables more agile development and testing processes in the financial technology sector, supporting the RBI’s recent efforts to enhance digital payment security and combat fraud through various technological measures.
Exto India Technologies Private Pvt. Ltd. has been selected as a participating entity for the test phase under the ‘On Tap’ application facility, specifically focusing on the Retail Payments theme. The company has developed an offline digital payment solution that combines Distributed Ledger Technology (DLT) with private biometric authorization to enable secure offline transactions. The development is particularly significant as it follows India’s broader initiatives in digital identity and authentication, including the expansion of Aadhaar authentication services to private entities.
The testing process involved collaborations with multiple partners, including Transcorp International Ltd. Common Services Centre and YPay Card. The RBI has indicated that the product meets the requirements under the Regulatory Sandbox framework and may be considered for adoption by regulated entities (REs), provided they maintain compliance with relevant regulations.
The technical architecture of the solution merges DLT and private biometric authorization mechanisms to ensure transaction security. The integration builds upon successful implementations of similar technologies globally, such as biometric hardware wallets for digital currency trials. The system aims to enhance the robustness of digital payment systems while maintaining user privacy and data security.
The RBI maintains strict oversight of the testing process, evaluating various aspects including compliance with regulatory guidelines, fund flow mechanisms within firms, advertising practices, and cross-selling activities. The comprehensive evaluation matches the RBI’s recent initiatives, including new verification requirements for electronic fund transfers and enhanced security measures for digital banking operations. The thorough assessment ensures that new payment solutions meet the necessary regulatory standards before potential wider deployment.
Sources: AKP Banking & Finance Digest, Beamstart, The Economic Times
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