The flying cars may not have happened yet (but self-driving cars are), but Siri and Google Maps are a few signs that we are, at least in part, living in the future imagined by the likes of Arthur C Clarke and Richard Matheson.

A generation ago, few would have imagined that you can pay for goods and services by just tapping on your phone or waving it. But mobile-based payments are an integral part of life for many today. You get out of your cab without going through the physical act of paying the driver by cash (or even card) and haggling over the change because your cab-hailing app is linked to your digital wallet. You pay for your evening smoothie at your nearest juice bar by simply scanning a QR code with your phone, and a single beep tells you you’ve paid.

Sounds futuristic, and it is.

In fact, payments are only a part of the story. If Amazon’s prototype works and is scaled up, you can walk into a store, pick up what you want and simply walk out – your mobile would have handled even the checkout, along with the payment, using deep learning, geofencing and sensor fusion.

In India, the future is here, but we have some unfinished business as well.

While it is true that India has always strived for financial inclusion (through efforts in priority sector lending, the Business Correspondent model, and microfinance), the results have been in the open for all to see. According to the 2011 Census, only 58.7% of total households in India had access to formal banking services.

However, the story is changing for the positive. In December 2014, India had 23 million credit cards and 624 million debit cards. Today, India has 32 million credit cards and 804 million debit cards. This rise in card numbers is an important indicator of India’s willingness to use modern payments technologies that are proliferating elsewhere around the world.

Like in Kenya and Bangladesh, mobile money had the power to change the face of financial inclusion and payments in the country. In these markets, users use mobile money as a financial channel completely independent of banks – which means that this instrument truly empowers the unbanked. Sadly, in its first run in India, a variety of factors, including regulation and distribution execution, contributed to the fizzling out of the concept.

Wallet Resurgence

Last year’s demonetization drive by the Indian government gave a fresh lease of life to a similar product – the mobile wallet. It has traditionally always been the urban or millennial segment that has adopted new technology, and mobile wallets are no exception to this in India. But wallets also have the potential to give financial access to the underbanked. It gives people an easy way to pay using something as simple as the mobile phone that is virtually an extension of their bodies today. The digital wallet eliminates the need for cash, POS machines and physical cards. What it does need, though is data, and a solid merchant acquisition and distribution plan.

In less than a year alone, PPI (Prepaid Payment Instruments, the formal name for mobile wallets) transaction volume and value almost doubled (from 59 Mn transactions in Nov 2016 to around 90 million in Aug 2017, and from Rs. 13 Bn in Nov 2016 to Rs. 27 Bn in Aug 2017). Wallet payments are today widely used for e-commerce, shopping, ride sharing, and peer-to-peer transactions.

But where will mobile wallets be a few decades hence?

The government has put PPI licensing on hold for now. It has given payments banks the green signal, trying to experiment with a model that marries digital finance with distribution reach. But an even stronger trend is the current government’s push towards the NPCI-led Unified Payments Interface (UPI), even mandating that wallets soon become interoperable with UPI. And banks, meanwhile, have each launched their own digital apps and tools to serve their customers.

The wallet, in its existing avatar, might face challenges standing up to banks and UPI. This is especially so in the case of a country like India, where having a bank account is necessary for one to operate a digital wallet.

With smartphone growth being what it is today, India is set to have 520 million smartphones in 2020. The number of Internet users in 2020 is estimated to be 650 million. There will be enough digitally savvy customers in the near future hungry for innovation, and they will be spoilt for choice with various payment applications on their phones. They will also be accustomed to slick interfaces and user experiences.

Artificial intelligence and big data can take payments a step further. Understanding customer’s usage patterns and social media profiles could help customize the user experience. The wallet may not be a simple stored-value account any more, evolving to be a complete financial management tool.

Things could also get interesting if PPIs were to go a step beyond the B2C scenario and into business payments. Agriculture, retail, logistics, education – the value chains in these businesses have immense potential to be served by digital wallet instruments. Again, these need not be merely stored-value accounts, but can be comprehensive tools that streamline payments.

“Any sufficiently advanced technology is indistinguishable from magic,” said Clarke. The future is already here, and technology is set to create more magic.