New Umbrella Entity (NUE) Network

The Reserve Bank of India (RBI) is said to have halted licensing for the New Umbrella Entity (NUE) network, a fintech institution intended to compete with the National Payments Corporation of India (NPCI).
Six groups had applied for NUE licenses, including Facebook, Google, Amazon, Flipkart, and others.

NUE is an entity (as defined by the Companies Act 2013) that will manage and operate the new retail payment systems such as ATMs, POS, UPI, and so on.
NUEs will be established for-profit entities to manage payments in the retail space.
These could provide a variety of retail payment services, such as the installation of ATMs, the provision of white-label point-of-sale terminals, Aadhaar-based payments, remittance services, and the development of newer payment methods.
They will also oversee clearing and settlement systems that could serve as an alternative to the bank-sponsored NPCI.
They will be able to charge transaction fees (unlike the existing NPCI).
All NUEs must be compatible with the National Payments Corporation of India (NPCI).

The NPCI is at the epicenter of the country’s digital payments.
The RBI has implemented NUEs in order to break NPCI’s monopoly.
The central bank also noted that during the pandemic, as people spent more time at home, the use of e-commerce increased, as did the incidence of internet fraud and cyber-crime.

The NPCI infrastructure processes 48% of all electronic retail payments in the country.
The RBI is concerned because so much of the country’s payment system is concentrated in one entity.

Users’ payment options will expand with the introduction of NUEs.
As e-commerce expands and reaches deeper into India’s unbanked hinterland, this will increase competition and eventually help boost transaction volumes for both platforms.
According to the World Bank’s most recent report on financial inclusion, approximately 190 million Indians did not have a bank account and more than half did not make or receive digital payments in 2017.
Customers who are experiencing frequent server transactions as a result of server overload currently have few options.
They will be able to use the other platform under the new regime.

Compliance in terms of data security and privacy applies to everyone in the payments and banking industry.
Every entity involved in payments and settlements must adhere to the same set of guidelines.
RBI already has a new set of guidelines on “Regulation of Payment Aggregators and Payment Gateways”.
It ensures that neither authorized Payment Aggregators (PAs) nor merchants on-boarded by them can store customer card credentials in their database or server, thereby preventing data breaches and potential abuse.

To strengthen the payment infrastructure network, NUEs will coexist with NPCI.
A strong and resilient infrastructure is required to meet the government’s ambitious goal of one billion digital transactions per day.
NUEs will not replace, but rather supplement, NPCI in expanding India’s digital payment success story.
We can ensure that the system as a whole in our country evolves in the best traditions of digital infrastructure adopted anywhere in the world by establishing a neutral and independent standards-setting body.

Source: https://economictimes.indiatimes.com/industry/banking/finance/reserve-bank-of-india-puts-on-hold-nue-licensing/articleshow/96803826.cms