This is the second time in a few weeks I’m referring to this scene from Ganeshana Maduve. Please watch it first.
To repeat the story:
Ramanamurthy the owner of the “vaTaara” (a kind of apartment that was popular in Bangalore till the 1980s, with lots of small houses in the same compound) wants to whitewash his house. The residents of the vaTaara demand that if he whitewashes his house he should whitewash the entire vaTaara. After a long and protracted negotiation, Ramanamurthy agrees to their condition – he doesn’t whitewash his house!
It is a similar story with taxi operators in India. Uber (the Ramanamurthy) figured out a way to bypass RBI’s two factor authentication system and offer seamless payment options for their taxi services. Soon other taxi operators like TaxiForSure and Ola started crying foul saying they too wanted their houses painted, i.e. they too wanted to locate payment servers abroad to accept one factor authentication credit cards.
And now RBI, like the rent controller ubiquitous (in mention only) in movies of the late 80s has stepped in and stopped Ramanamurthy from painting his house, too – they’ve barred Uber from charging in US dollars for Indian rides. It would be interesting to see how the market will develop now.
My personal opinion is that RBI’s insistence on two factor authentication is half-assed. They should make every effort possible to increase the number of credit card (or account-to-account) transactions. On one hand it decreases flow of black money but more importantly it means that people will keep more cash within the banking system (rather than as hard cash) which will have a multiplier effect on money available for lending and all that.
It’s fine to have regulations in place such that credit card fraud is minimized but that doesn’t mean cutting credit card transactions altogether! Hopefully the RBI will see the light of day on this one soon.