Gearing up for a cashless future

The mobile payments market in India is expected to reach $1.15 bn by 2016, according to a recent report by Knowledgefaber.

It is expected to accelerate with a push from the Reserve Bank of India (RBI) for m-banking and m-payments. Recently, the RBI removed the cap of `50,000 per day per transaction through mobile banking. It has also set up the National Payments Corporation of India (NPCI) to help integrate the multiple systems offering varying service levels currently in use, into nation-wide uniform and standard business processes for all retail payment systems.

With the value of the retail sector expected to surge to $1.3 tn by 2020, India continues to be among the most attractive investment destinations for global retailers. At present, the Indian retail industry, valued at $455 bn, is largely dominated by unorganized retail with organized segment accounting for only 8% of the total retail market. However, on the back of the relaxation in the FDI (foreign direct investment) norms for multi-brand retail in India, coupled with increasing urbanization and rise in disposable incomes in the country, the organized retail segment is expected to grow at 24% from 2012- 2016.

To benefit from this and deal with the changing consumer behavior, retailers are innovating ways to enhance customer experiences and gain customer loyalty across stores. According to the e-tailing group's 12th Annual Merchant Survey report, globally 76% retailers are making mobile initiatives as strategic goals in 2013. About 29% of the retailers see 20% of their traffic coming from mobile devices. That's a significant increase from just 3% a year ago.

DEPLOYING MOBILE PAYMENT SOLUTIONS

With an overall mobile penetration of over 70%, almost every customer for retailer has a mobile handset. For retailers, mobile payment is quicker to process, can reduce transaction and maintenance costs (as it does not require any up-front contracts with consumers or card companies), and payment is received in real-time.

Additionally, mobile payment enables retailers to get valuable customer data related to their purchase. This allows them to send targeted and customized special schemes, resulting in more engagement with their customers. The outcome has higher recall value and most importantly ‘customer loyalty'. Furthermore, mobile payment solutions also provide retailers with increased operational efficiency and interchange costs.

WHAT'S IN IT FOR THE CUSTOMERS?

With roughly 861 mn mobile connections by the end of February 2013, mobile phone is almost ubiquitous in India. For consumers who are always on-the-go, mobile payment systems offer unmatched convenience. The phone acting as a digital wallet can be used for storing promotional coupon information, purchase record details, and locate and offer discount coupons.

Most importantly, it offers the consumer a secure payment option with one-time user registration, location information, and enhancing security on his mobile. This implies that the buyer identity can be verified through multi-factor authentication and help to avoid fraud.

TECHNOLOGIES ENABLING MOBILE PAYMENTS

There are several technology options available for retailers to pick from for implementing mobile payment solutions. Some of the most common ones include:

Near-Field Communication (NFC): According to a survey by Juniper, the NFC retail payments market worldwide is expected to exceed $180 bn by 2017. Some merchants in India too are conducting pilot projects and we are beginning to see some early movers already taking advantage of this technology.

Mobile NFC services have the potential to add a whole new dimension to people's digital life, with mobile phones acting as contactless devices for tap-and-go applications, including transport ticketing, payment, loyalty, and other retail services like coupon details and coupon redemption. Retailers can leverage this contactless technology to increase consumer engagement and introduce new service innovations.

QR Codes Based Mobile Payments: Quick Response (QR) code is a two-dimensional form of a regular barcode that is seeing an upward adoption trend given that it can facilitate mobile payment at point-of-sale terminals, without significantly altering the existing infrastructure.

Smartphone cameras with decoding software can be used to scan the QR code, which would then access user information stored in a bank's network to complete transaction. As this technology does not require any special hardware to be installed on the mobile, it is compatible with any smartphone running Apple iOS or Google Android software.

The above two options are used to trigger payment which in turn is processed by cloud based mobile payment processing system. However all details about the customer's identity and payment accounts are securely stored ‘in the cloud' and never on the device. Access to this personal information is protected by credentials known only to the customer.

CONCLUSION

Mobile payments are the future of cashless transactions providing convenience and security to the end-users. The RBI has now permitted the non-banking institutions to issue mobile payment instruments for their end-users and has also increased the daily limit for mobile transactions. With increasing regulatory support in India, availability of various technology solutions and the changing consumer expectations, retailers can benefit from innovative mobile payment offerings. Also with the increasing competition it is imperative that retailers engage their customers in a better way, add value to their shopping experience by integrating their loyalty schemes, e-coupons, and other promotional activities, thus increasing consumer loyalty. This would be in the interest of not only the retailer but also the customers.