What are umbrella entities?
As envisioned by the RBI, an Umbrella entity is a non-profit organisation that will set up, manage and operate retail payment systems, ATMs, White Label PoS, Aadhaar-based payments and remittance services.
Payments that are made via these Umbrella entities are known as Umbrella payments.
How does Umbrella payment affect retail payments?
The main advantage of Umbrella entities coming in is the end of the monopoly of the players backed only by banks. This is seen as a major breakthrough since non-banking entities will have more representation in the existing framework.
It is also believed that adding more Umbrella entities can contribute to the country’s financial stability because of the issues they address related to risk concentration. They are also expected to remove the bottlenecks that exist in the current retail payments system.
These Umbrella entities are also expected to prevent the retail market from crumbling due to shocks in the international markets due to various reasons.