Four Mega Trends Transforming India

The growth of Indian digital payment industry is expected to be driven by four trends that would impact how this industry looks in the future.

• India going on digital platform
• “Favorable” regulatory environment
• Emergence of NextGen payment service providers
• Enhanced customer experience

India going on digital platform

Here are the key factors taken into consideration which describes that India is now growing on Digital India platform:

• Mobile trajectory: India has been ranked #2 in the world with over 1 billion mobile subscriptions. Approximately 240 million people use smartphones and this is supposed to increase to over 520 million by 2020.
• The internet network: With increased 3G and 4G penetration even in the remote parts of the country, the Internet network in India is rapidly expanding. The National Optical Fibre Network (NOFN) initiative by Digital India is set to provide broadband connectivity to cover 250,000 Gram Panchayats across rural India. While 70 percent of rural users currently access the Internet from their mobile handsets, the initiative is expected to increase the adoption of data enabled devices in these areas. With these developments in place, we expect around 90 percent of all devices to be internet enabled by 2017 and the number of internet users to double to nearly 650 million by 2020 from the erstwhile 300 million in 2015.
• Banking on digital growth: Over the last few years, digital transactions have shown steady growth of 50% every year followed by ATM transactions growing at 15%. While, branch-based: Cheque, NEFT transactions have reduced by almost 7% in FY-15 as compared to FY-14

“Favorable” regulatory environment

Payment industry is experiencing a drastic change every year. The Government and concerned regulators have recognized this and have constantly kept pace with the rapidly changing environment as per technology and customer expectations.

Here are some key regulatory steps that are helping to enable digital payments in India:

1. KYC relaxation for small transactions up to INR 10,000 as per current RBI guidelines
2. Exemption from Two-Factor Authentication or transactions made with Indian debit / credit cards, irrespective of transaction value.
3. The advent of Aadhar as a national identity instrument has made the KYC process extremely easy. By linking a customer’s mobile number electronically to his / her Aadhar account, under Jan Dhan Initiative, over 270 million accounts has being opened.
4. Unified Payments Interface (UPI): The Unified Payments Interface launched by NPCI is an integrated open architecture set-up that will change the way customers manage payments. The UPI will combine all services from Immediate Payment Service (IMPS), Automated Clearing House (ACH) to RuPay into one common platform. The open architecture of UPI will provide access to all payment service providers (PSPs), banks, FinTechs, payment banks etc. This is expected to improve user experience and enable payment service providers to provide easy and simple payment solutions. It is also expected to enable multiple use cases on the UPI platform including peer to peer payments, person to merchant payments just like: Online fee payment as through online fee collection platform provided by Feegenie and business to business payments.
5. Bharat Bill Payment System (BBPS):

Owned and operated by NPCI, BBPS is envisioned as an ‘Integrated Bill Payment System’ that is interoperable, accessible; cost effective and allowing multiple payment modes.

Emergence of nextgen payment service providers

Indian payment industry has witnessed significant growth in the last 3-4 years. Now the competitive digital payment market consists of telcos, banks, wallet companies, e-commerce / tech firms and, in the near future, payment banks etc.

1. Bank-driven Mobile Wallets: Banks have now started offering their own mobile wallets in addition to the mobile banking apps Like: Pockets by ICICI Bank, Lime by Axis Bank, PayZapp by HDFC Bank, SBI Buddy by SBI and Ziggit by IDFC Bank.
2. Telecom company driven: Large telecom companies such as Airtel and Vodafone launched mobile payments solutions, Airtel Money and Vodafone M-Pesa while Idea Money from Idea Cellular, mRUPEE by TATA and Jio-Money by Reliance are other Telecom company driven payment solutions, launched to help consumers conduct a variety of financial transactions conveniently.
3. Prepaid wallets: such as mobile wallets like: Paytm, MobiKwik, Freecharge and Citrus Pay and Prepaid cards like: Oxigen, Itz Cash, Suvidhaa and GI Tech cards. Some of them also includes tech firms (e-commerce, radio cabs, entertainment booking) to offer in-house wallet solutions. For example, Snapdeal acquired Freecharge, Flipkart acquired FxMart to offer Flipkart money and Amazon acquired Emvantage. While Ola offers Ola Money, Bookmyshow too has its own wallet app to service customers.

As per RBI’s stated objective of driving financial inclusion and enabling high-volume low-value transactions and reducing the dependence on cash, RBI approved  eleven entities to set-up payment banks in 2015. These entities include telecom players (Airtel, Vodafone, Uninor, Idea, Reliance Jio), tech-centric payment players (Paytm), next-billion focused players (NSDL, Fino, India Post) and NBFCs (Mahindra Finance, Cholamandalam).