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Future Innovations In Digital Payments Processing

Below are the key innovations that have the potential to accelerate digital payments adoption.

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Digital payments’ transactions value in India is expected to grow at a CAGR of 20.2 per cent between 2019 and 2023. Our worldwide share in digital payments is also expected to increase from 1.5 per cent to 2 per cent in the next few years. This growth rate appears realistic because of the slew of measures that the regulator, government and the industry have taken over the past few years to promote and build ubiquitous and low-cost digital modes of payment. 

The country has seen tremendous growth in the adoption of innovations such as UPI, Aadhaar Pay, QR code based payments, e-wallets etc. while traditional payment modes like NEFT, RTGS and cards have been equally successful in promoting a less-cash economy. 

However, since the adoption of digital payments remains low at 5 per cent and a majority of payments are still made in cash, the scope for future innovations in digital payments are immeasurable. Below are the key innovations that have the potential to accelerate digital payments adoption.

Android POS terminals

At the end of 2016, there were 1.7 million POS terminals which increased to 3.7 million POS terminals by March 2019. Despite a significant growth, barely 15 per cent of retail outlets are covered. The acceptance infrastructure needs an upgrade as there is an increase in the number of cards in circulation and other payment options for consumers.  The next wave of innovation in this segment will be the introduction of Android POS terminals. Android POS supports all payment modes across chip, EMV and contactless cards, virtual cards, Samsung Pay, Bharat QR, UPI, Aadhaar Pay, etc. Moreover, it will also provide the merchants access to advanced analytics on transaction data for identifying business trends and consumer behaviour. It has the potential to replace existing legacy hardware and software solutions which are costly to maintain and upgrade.

UPI 2.0

Since demonetization, UPI has recorded a volume growth of 37192 per cent and value growth of 21487 per cent. It is expected to touch 1 billion transactions a month with a focus on Person-2-Merchant payments. The roll out of UPI 2.0 features clubbed with attractive cash back offers by third party UPI players will give a further boost to UPI transactions.

Transit payments through FASTags and NCMC

There is a dedicated focus to digitalize small ticket size payments in transit by the government. It is a mandate that all new vehicles need to have FASTag affixed on the windscreen. About 22 banks issue FASTags to consumers which are accepted at over 500 national and state highways in the country. Consumers can now subscribe to these tags through mobile apps as well. National Common Mobility Card have been launched for seamless use in transit payments like Bus, Metro etc. and can also be used for toll parking, small value retail payments etc. It is an interoperable and scalable contactless card that has been adopted by all card schemes. These innovative solutions will witness even more adoption in the coming days.

Artificial Intelligence and Machine Learning (AI & ML)

AI & ML are contributing to the payments ecosystem and enhancing the customer experience like never before. These tools are helping financial institutions gain better customer insights by analysing their payments behaviour and notifying them with preferred services. Consumers are already getting reminders towards their credit card bill payments, mobile recharge etc. and are also guided by chat bots for their standard queries. Moreover, AI & ML tools are successfully reducing fraud and security risks, and are helping organisations to identify potential threats.  Companies that continue to invest seriously in this area will possess greater chances of gaining strategic advantage among others.  

Internet of Things (IoT), Big Data Analytics and Blockchain

It is predicted that by 2020, more than 50 billion devices (‘things’) will be connected. IoT use cases such as home automation, wearable technology etc. are already simplifying the lives of consumers through digital assistance by helping them place orders and pay with ease using voice commands. Big data is being used by e-commerce giants to send personalized notifications to consumers on their mobile phones. While the shopping experience for consumers has become enhanced by giving them the accessibility to pay directly using apps, the retailers are also provided with access to customer spend analytics which further translates into refined targeted offers, loyalty programs and even new product ideation/ launches. Lastly, Blockchain technology, if implemented in India, can be used effectively for foreign exchange, cross border payments and remittances etc. among other use cases. Blockchain-based payments are cost-effective, instant, secure and transparent. 

In conclusion, payments landscape in India is making a significant progress and we have only seen the tip of the iceberg. Wide adoption of the above mentioned solutions will help us achieve the dream of making India a ‘cash-lite’ society. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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digital payments

Deepak Chandnani

The author is Managing Director, South Asia & Middle East, Worldline

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