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Expert call: Trends shaping up India’s payments landscape

We hosted a call on India’s payments landscape with an expert from one of the Big-4 consulting firms. The expert has over 15 years consulting experience, being associated with NPCI in advisory capacity and having assisted private/payment banks to set up payment products. The discussion was focused on demystifying the Indian payments landscape and trends shaping its future outlook.

Key takeaways: 1) The payments space is fast evolving with ‘differentiators’ in the earlier phase soon becoming ‘must haves’; 2) favourable regulatory interventions have modernised the payments infrastructure (robust interoperable infrastructure created with instant and multiple payment options); 3) credit on UPI – though talked about as a big revolution may not happen soon ; 4) New Umbrella Entities (NUEs) are aimed to diversify systemic risk, increase innovation and competition; 5) free UPI pricing and zero MDR on RuPay card may not be sustainable for long; and 6) scope for wallets may diminish as UPI, online banking, etc. evolve.

How has digital payments space evolved sharing ‘must have’ and ‘differentiator’ perspective?

The past decade witnessed constant evolution of the digital payments industry.

* During 2010-15, online bill payments, micro ATMs, mobile wallets, tablet banking, virtual cards, social media were the key differentiators. On the other hand, ATMs, core banking, branch banking, debit cards have been must-haves during 2010-15.

* During 2016-20, differentiators during the earlier phase (2010-15) became ‘must haves’ and new areas emerged as differentiators – such as blockchain, Aadhar Enabled Payment System (AEPS), UPI, BHIM, payment hubs, fintech, etc.

* Going forward into the 2020s and beyond, the key distinguishing factors would be invisible payments, contextual payments, offline payments, overlay services, etc.

* Offline payments will become ‘must have’ especially for locations where there is no internet connectivity and to tap customers who have only feature phones. RBI and NCPI are closely working on this to bring the remaining population to the digital arena.

* Invisible payments are likely to pick up in India over the next 2-3 years (Amazon has done this very well in the US).

What India-specific drivers are shaping up India’s payments space?

* Trends observed globally are also shaping up India’s digital payments story to create a ‘less cash’ society.

* Smartphone revolution: 50% of internet users access the internet via smartphone. In fact, smartphone will enable technologies like NFC, multifactor authentication, tokenization, location-based deals, etc.

* Non-traditional players are entering the segment via licenses or partnerships.

* Favourable regulatory interventions have modernised the payment infrastructure in India and created robust interoperable infrastructure providing the consumer with instant and multiple payment options.

* Banks and digital innovators are increasingly focusing on providing seamless customer experience to ensure minimal friction during payments. This is being further supported by enhanced security features.

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