By: Kumar Karpe, CEO, TechProcess
The adage ‘Cash is trash’ couldn’t be truer than it is in today’s digital times. This is the era of payment gateways, digital wallets (and super wallets), eCommerce mobile apps, and the like, where the business landscape is increasingly dominated by online payments. But even this sphere has seen disruption – eCommerce (electronic commerce), that is, the buying and selling of goods, products and services over electronic systems such as the Internet and telephone, has been upstaged by mCommerce (mobile commerce), the conduct of these activities through wireless handheld devices such as cell phones and PDAs. Smartphones and the mobile Internet have changed the way people network, bank, shop — and make payments. According to a KPMG report, m-payments have seen a CAGR of 97.4% between 2010 and 2015.
The explosive growth is not without reason. While eCommerce has been around for a while, it is more limited, requiring a computer and Internet connection. Mobile phones, on the other hand, work on the go through wireless networks. Moreover, once an app has been downloaded, it may work offline as well, and takes much less time to open, compared to a website. The increased functionality of the smartphone is, in fact, leading to a blurring of the lines between m-payments and e-payments. For example, when you access the internet/WAP browser on your mobile phone to make a payment through your bank’s online service, the activity is best classified as an e-payment, even though it is undertaken from a mobile.
Payments landscape in India – from the card to the mobile screen
With a mobile subscriber base of 960 mn (February 2015), growing at 14% YoY, and about 40% unbanked population, m-payment has a huge potential in India. Online payments witnessed a CAGR of 50% between 2007 and 2014, with m-commerce alone standing at $ 2.5 bn (2014). Robust growth in eCommerce has led to a corresponding growth in payments gateway market as well, which is expected to reach $ 40 bn by 2016.
The key drivers for m-payments in India are availability of affordable handsets, low mobile tariffs and increasing network coverage across the country. Negative factors, such as lack of adequate banking infrastructure, and low internet and PC penetration, are expected to provide further impetus to the growth of the m-payments market.
With the RBI relaxing norms on m-payment transactions and allowing institutions other than banks to provide m-wallet services, the regulatory environment for m-payments is quite favorable. Mobile payment platforms make up nearly 80% of the m-payments market in India. That’s not surprising, considering they enable a consistent user experience across different platforms, channels and devices, while ensuring offline businesses can collect e-payments securely.
Innovative payments solutions companies have gone a step further, coming out with a super wallet of debit cards, credit cards and bank accounts. For instance, Paynimo by TechProcess provides consumers the choice to decide how they want to pay for various transactions. This comprehensive multi-mode payment platform can turn a merchant’s smart phone into a virtual Point-of-Sale (PoS) device. The merchant’s and customer’s smartphones can be used to make payments securely, replacing cash-on-delivery with e-payment on delivery. And to be a step ahead in the m-payments ecosystem, this next-gen super wallet should also have the facility to enable one-time-use-transactions using actionable payment links that expire within a limited time span after use so as to maximize security.
Banking on that app
Interestingly, several banks in India are stepping into the e-commerce space indirectly through payment services in an attempt to entice customers to buy stuff online, book taxis, top up mobile phones, buy movie tickets, check out restaurants, etc. Most have come out with apps with digital wallets that can be funded through any bank account. These apps enable consumers to make financial transactions in one click and also send money to anyone in their universe of contacts on Twitter, Facebook, WhatsApp, email or phonebook.
Some even allow physical pre-paid cards to be generated from the wallet for offline purchases. Others have e-malls, or virtual storefronts, that display offers extended by sellers. Banks are also looking at incorporating a QR (quick response) code reader in their apps that will allow account-holders to make m-payments by using their smartphones to scan a code generated by retailers.
Apple Pay, Android Pay, Samsung Pay – The Digital Wallet war is on
Globally, the mobile payment system is undergoing a churn. Google is having another go at mobile payments with Android Pay, a new system that will enable android smartphone users to make tap-to-pay purchases at physical retail stores. All they have to do is unlock their smartphone and place it in front of a contactless reader in a retail store to make a purchase. Android Pay also shields user credit card data by creating a virtual credit card number to be used for in-store transactions.
This is Google’s second attempt in the field of mobile payment. It had previously tried to do the same gig with Google Wallet, but could not entice many partners, with the result that carriers blocked the app, preventing it from working on Android phones sold for their networks.
Then there is Apple Pay, the mobile payment system developed by Apple Inc. Apple Pay combines Near Field Communication (NFC) technology with Touch ID biometrics and tokenization (via programmes such as the MasterCard Digital Enablement Service) for secure, contactless payments.
Samsung has also stepped in with Samsung Pay, which will work only with the company’s latest phone, the S6. Samsung Pay will work with NFC technology, as also with standard magnetic stripe emulation technology, to offer wider compatibility with merchant terminals. So, there is a lot set to happen in the ever-expanding universe of m-payments. And yes, you can expect the m-payment ecosystem to hot up in India as well.