NCMC: Another step towards a less-cash India

NCMC guidelines and immediate goals

The transport sector has seen the implementation of closed and semi-closed loop variants with limited interoperability. The goal of the NCMC initiative is to address the existing gap by creating a common interoperable payments ecosystem.

With rapid urbanisation, there has been a lot of focus on providing faster modes of travel across multiple cities. A snapshot of some of the major current and future transport projects in India.²

The transit payments card space has evolved considerably from a closed-loop system to a full-fledged EMV card-based one:

Evolution of transit cards

The guidelines issued by the Department of Financial Services (DFS) in 2018 on the inclusion of the NCMC chip on EMV cards are extremely significant from the uniformity and interoperability perspective. These guidelines are aimed at enabling seamless transport across all transport systems across the nation through the use of a single card. The card is expected to:

1. Have a stored value that can be used in the offline mode at transit gates and at other touchpoints in the retail space, depending upon the services activated.
2. Support multiple operators, i.e. multimodal transport.
3. Store various kinds of transit data like single journey tickets, loyalty point and passes.
4. Be compliant with contactless ISO 14443 standards.

Future outlook

One of the long-standing challenges with using digital payments at offline touchpoints is that a user needs to physically purchase a card at the ticket booth after completion of KYC, load the card and use it. As a result, consumers typically find cash payments more convenient. However, with all existing credit and debit cards being made NCMC compliant, the additional step of making an explicit purchase is eliminated. This is likely to significantly boost low-value, high-volume transactions at multiple offline retail outlets.

Going forward, we expect firms to jump on the bandwagon and tap use cases in the following areas:

In the near future, we expect faster adoption of NCMC in the smart cities domain. For instance, NCMC can be issued to consumers in smart cities in collaboration with sponsor banks. A few noteworthy use cases include payment of utility bills, taxes and transit.

Another interesting area could be financial inclusion. A strong linkage can be developed between NCMC and financial inclusion schemes such as Pradhan Mantri Jan Dhan Yojana (PMJDY). Government/payment system participants may explore re-carding of debit cards issued under PMJDY and building acquiring infrastructure with local public transport operators, oil marketing companies, municipal corporations and other stakeholders. Although this exercise will take time, it has the potential to significantly transform the issuing and accepting infrastructure in rural areas and tier II cities and beyond.

Depending upon the adoption of NCMC, one may expect participants to explore new age forms of payment instruments such as mobile wallets and wearables and innovative loyalty offerings in the future, further boosting adoption of digital payments at offline touchpoints.

Apart from improving customer experience, NCMC has clear benefits for banks as well. The card’s ability to support both offline and online transactions in a contactless and interoperable manner is envisaged to enhance the operational efficiency of the entire payments ecosystem. Moreover, the programme is envisaged to have other benefits—for instance, elimination of duplication of efforts and standardisation across the entire value chain. More clarity with respect to scheme-specific changes, deadlines, refund process, transfer of funds, closure of account, among other aspects, will further drive NCMC adoption and boost penetration of digital payments in the country.