RBI’s Circular on Cooperative Banks: A Game-Changer for Digital Payments, by Deepak Chand Thakur

by Deepak Chand Thakur, Chairman and CEO, NPST

“India currently has over 450 million UPI users, yet person-to-merchant transaction processing remains concentrated among a few large banks. The recent RBI circular allowing cooperative banks to offer acquiring services marks a significant turning point in this landscape. Historically, these banks have served rural and semi-urban populations, but the new regulations open the door to their active participation in the rapidly expanding digital payments ecosystem. This move promises to enhance financial inclusion by enabling cooperative banks to diversify their offerings and better serve their customers through digital channels.

However, the challenge lies in the inherent complexity of the acquiring business. Acquiring services demand large-scale infrastructure, low margins, and sophisticated technology to handle high transaction volumes efficiently. Cooperative banks, often constrained by budgets and limited access to the latest technologies, may struggle to build or implement these systems independently.

In this context, the Payment Platform-as-a-Service (PPaaS) model emerges as a highly effective solution. By adopting PPaaS, cooperative banks can bypass the technology and financial barriers that might otherwise impede their ability to participate in the acquiring business. The PPaaS model provides an end-to-end technology infrastructure that requires minimal upfront investment, making it an ideal choice for banks that lack the internal expertise or financial resources to build such systems from scratch.

NPST stands as a key player in this space, offering comprehensive technology stacks to facilitate the seamless integration of acquiring services. By partnering with NPST, cooperative banks can focus on their core strengths—acquiring merchants, scaling their operations, and expanding their market reach—while NPST manages the complex tasks of technology development, compliance, and infrastructure management.

Moreover, NPST enhances the value proposition by providing essential value-added services like merchant due diligence, reconciliation, fraud management, and reporting. These services are crucial for mitigating operational risks, ensuring adherence to regulatory requirements, and securing transactions in an inherently high-risk space. The pay-per-use model further ensures that cooperative banks only pay for the services they utilize, minimizing initial capital expenditure and allowing them to scale their operations flexibly in response to growing demand.

The collaboration between cooperative banks and PPaaS providers presents a viable pathway, ultimately ensuring that even underserved populations can participate in the financial mainstream.”