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Madhusudanan R

Madhusudanan R is Founder at M2P Solutions Pvt. Ltd.

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New Age Technology Shaping India's Digital Payments

Banks have been co-opting with the technology companies and the ultimate beneficiary in this technology led Payments race is you and I as consumers.

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Most products, good or service goes through what is called as LNU cycle before it reaches mass market. What really is LNU? Essentially, a product or service that start as a luxury, by definition being expensive, only for the rich, moderates with more providers coming in, becomes a necessity, and over time with thrust by external forces acquires escape velocity to become a utility.

So, the television took 26 years in the US to complete this cycle. The iPod probably took about 3 years, Facebook from the first line of code to to-date in little over a decade is trying to envelope the world by being looked up as a utility.

Holding a Credit card in the 90’s was considered luxury, it has been for a long period of time been a necessity and on the eve of the first anniversary of Demonetisation, as we look back at the year gone by, if there is one avenue that clearly stands out as a benefactor, it is Digital Payments, safe to say demonization is that trigger that has nudged Payments to the cusp of becoming a utility.

India is at Digital payments 3.0. Payments 1.0 was about Cards linked to a bank account and that had a run for nearly 20 years and grew to a base of 600+ million. Payments 2.0 was about Payments products that are not linked to accounts and were digital by design, aka wallets, flourished under specific use cases and new age companies with VC money attracted 100’s of millions of customers, truly driving Digital Payments 2.0

It is pertinent to note that, as we enter Digital Payments 3.0. We are going through a phase wherein we are witnessing the unbundling of Payments from Banking. In the Debit / Credit cards ecosystem, where one held their account was of much value to what products they had access. So, if the Bank offered a Platinum Debit card, they can simply get the benefits it offered, if they did not, they did not have access to that product or service.

The UPI or Unified Payments Interface is a manifestation of Digital Payments 3.0, since launch a year ago has witnessed rampant adoption driven by Person to Person transfers. UPI has created a layer wherein it doesn’t matter where you hold your account, you as consumer can derive the benefit of what the best platforms can offer. As an example, if you bank with Bank A, you can use Bank B or Bhim or any Third-Party application providing UPI services.

An important paradigm shift, where the customer’s sink of funds will be of less significance to where and how they are transacting, this alone will drive India centric Payments innovation with the promise of mass scale adoption. It is anybody’s guess then that the world’s best funded companies, the Internet behemoths with the best talent and technology that includes the likes of Facebook, Google, Amazon, Alibaba, WeChat and our homegrown Flipkart, Hike, Ola, et all are all in a race to innovate around UPI.

The first sprouts from the UPI seeds are already visible. Google Tez, launched few months ago, comes with a very simple sound based payment option, obliviating the need to read or write as well as maintain anonymity. Probably, Google’s first globally and an innovation for India. You can pay your corner store grocer pretty much without revealing any information about yourself.

Last week, PhonePe launched a sub Rs 1000 calculator that also doubles up as an acceptance device, a shining example of Indian Ingenuity coupled with a deep market insight that every small trader keeps a calculator on their billing counter and all they have to be is number literate, truly a Make (for and) in India product if it takes off.  

The Government on its part nudged the incumbents of Payments 1.0 & 2.0 that is the Banks, Wallet companies and payments networks to launch a common QR code standard called BharatQR, all that a merchant will require is a print out of QR code stuck in their counters and a basic phone to receive confirmation when a customer makes a payment.

While this is just a start, chomping at the bits on what WhatsApp or Amazon will roll out in the months to come. Banks have been co-opting with the technology companies and the ultimate beneficiary in this technology led Payments race is you and I as consumers. We sure are spoil for choice.

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


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