The Four Mega Trends Transforming Indian Payment Trajectory

Over the last few years, digital transactions have shown speedy growth of 50 per cent Y-o-Y, followed by ATM transactions growing at 15 per cent. The branch-based transactions have almost reduced to 7 per cent in FY 15 as compared to FY-14.

According to the latest survey reports by The Boston Consulting Group and Google the payment landscape in India has mirrored developments occurring in the global payments arena, albeit with a time lag. Although, the digitization of payments in India is a recent phenomenon the trend has displayed an exponential growth in the sub-continent with rapid growth being witnessed in the digital payment transactions.

Therefore, let’s check out some of the four mega trends transforming India:

The growth of the Indian digital payments is expected to be driven by four trends that are also likely to impact how this industry looks in the future.

• India Going Digital
• Favorable Regulatory Environment
• Enhanced Customer Experience
• Emergence of NextGen Payment Service Providers

India Going Digital

India is rapidly evolving into a digital behemoth. Rising smartphone penetration and Internet access have ensured that Indian consumers stay constantly connected. This is also reflected in the growth of digital banking transactions.

Mobile Trajectory- India currently ranks second in the world with over 1 billion mobile usages and of this, approximately, 240 million consumers use smartphones and this is expected to be escalate to 520 million by 2020.

The Internet Network

With increased penetration of 3G and 4G in the remotest corners of the country the internet networks in India is rapidly expanding. The National Optical Fibre Network initiative by Digital India is set to provide broadband connectivity to cover 250,000 gram panchayats across rural India. While, 70 per cent of rural users currently access the internet from their mobile handsets. Therefore, we expect around 90 per cent 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 previous 300 million in 2015.

Banking on Digital Growth

Over the last few years, digital transactions have shown speedy growth of 50 per cent Y-o-Y, followed by ATM transactions growing at 15 per cent. The branch-based transactions have almost reduced to 7 per cent in FY 15 as compared to FY-14.

Favorable Regulatory Environment

A lot is changing in the payment world. The government and concerned regulators have observed this and have constantly kept pace with the rapidly changing environment vis-à-vis technology and customers’ expectations. However, this is still the beginning, and lots more needs to be done in this space to make it conducive for payment business to succeed in the country.

Emergence of NextGen Payment Service Providers

India has witnessed significant payments activity in the last 3-4 years. The competitive digital payment landscape in India now spans telecos, banks, wallet companies, e-commerce, tech-firms, and in the near future payment banks.

Bank-led: In the past, banks have largely offered mobile banking apps with integrated bill payment solutions. However, customer experiences with mobile wallets have proved tp be far more seamless and quick, leading to customer preferring wallets for mbile recharge and bill payments. Thus, banks have now started offering their own mobile wallets, in addition to the mobile banking apps.

Telco-led: Large telcos such as Airtel and Vodafone have launched mobile payment solutions, Airtel money, and Vodafone M-Pesa, targeted at their customer base.  The solutions were initially USSD based to ensure even non digital-savvy customers find it easy to use. Idea money from Idea cellular, mRUPEE by TATA and Jio money by Reliance are other telco-led payment solutions launched to help customers to conduct financial transactions conveniently.

Prepaid Wallets: In 2009-10, the RBI had issued 26 prepaid payment instrument licenses (PPI), PPI issuers could now issue semi-closed wallets that enabled payments without 2F authentication. As a result, two types of PPIs emerged, the mobile wallets and prepaid cards.

Enhanced Customer Experience

Indian Customers are now used to a superior experience owing to the popularity of e-commerce, and are demanding a similar experience from their financial service providers as well. This includes seamless access to bank accounts and payments, coupled, with rewards, loyalty and offers.