How technology is becoming the centerpiece of the entire digital payments move, and what needs to be done to make it work
The demonetisation move of November 8, 2016 when 86% of cash currency in circulation was withdrawn, has given a big push to India's digital economy. That move, along with direct benefit transfers and the new GST regime have seeded the growth of digital finance in India paving the way for greater compliance and transparency in financial transactions. So much so that the government plans to achieve 15% of the GDP from digital payments by 2020, as per a Google-BCG report published last year. Schemes like Jan Dhan Yojana that enrolled 260 million unbanked people into banking services, the BHIM app for digital payments have been some of the initiatives that the government has taken to fuel this growth.
These moves have seeded the growth of digital finance with communication technology as the pivot. In order to leverage the trend, forward thinking organizations must understand how communication technologies are being leveraged.
Mobile Internet is Where your Customer is
While mobile voice technology drove India’s growth over the past two decades, future growth will be fuelled by mobile internet devices, according to a Deloitte India report. India has 348 million Internet users, which by 2021, is expected to reach a staggering 555.3 million or 44% of our population.
The important trend here is that a large chunk of users access the Internet from their mobile devices. According to IAMAI (Internet and Mobile Association of India), in 2015 itself, two-thirds of the Internet user base were accessing the net from their mobiles, 72% from urban and 28% from rural areas. This rapid expansion was largely caused by declining smartphone prices and highly competitive mobile Internet tariffs offered by telecom players.
The M-Commerce Boom
Availability of inexpensive smartphones led to the growth of mobile commerce, especially in tier-2 and tier-3 cities, says an Euromonitor blog published in February 2017. Mobile internet retail, the Euromonitor blog said, has grown from 5% in 2012 to 17% of total internet retail sales in 2016.
Online retailers used the opportunity to offer big discounts for consumer purchases made through mobile apps, which further enhanced mobile Internet penetration. Flipkart, Shopclues and Amazon have reportedly said mobile app and sites formed 75-80% of their traffic during major sale events in October 2017.
M-Banking and Wallets Get a Leg-up
The biggest gainers of the push towards a cashless economy are mobile banking apps and digital wallets run by ecommerce marketplaces and fintech startups. While Niti Aayog said digital payments rose 55% in 2016-17 against a 28% growth during the five-year period ending 2016, Unified Payments Interface, the RBI-promoted instant payment mechanism has shown a 100%-plus growth for October against September this year. Data shared by the National Payments Corporation of India, which manages UPI, October showed 76.9 million transactions against 30.9 million, as of September,2017.
PoS Terminals Fuel Digital Transactions
Handheld PoS terminals have also been a facilitator of cashless transactions. These devices are being put to a wide variety of applications, like processing card payments at retail locations, Aadhaar authentication based Micro ATMs for banks to facilitate financial inclusion, mobile payment processing during home delivery of goods by e-commerce companies, etc. Online PoS terminals deployed by all banks totalled 29,00038 in September 2017 - a sharp jump from 17,66481 in December 2016, RBI data reveal.
Ensuring Sustained Growth
To leverage this mobile channel for e-commerce, enterprises must ensure a robust and secure payments and application infrastructure. Data protection with end-to-end encryption is an essential stepping stone for this with uptime of the communications network the other essential building block that firms should look at. As the number of cashless transactions grows, enterprises must provision for continuous investments in communications technology.
RBI website statistics on PoS Terminals, September 2017
NPCI social media handle data on UPI transactions, October 2017
Assocham- Deloitte Study