Financial Technology, called fin-tech, has picked up inexorable momentum and percolated in most aspects of our lives. The revolutionary intersection of mobile technology and financial services is effectuating the financial inclusion of nearly a billion unbanked people. This new ordinal population is estimated to bring over $3 trillion transactions by 2025 (data: aciworldwide.com) into the global commerce ecosystem.
The most conspicuous fruits of the marriage of fin-tech with mobile technology have been the revolutionary changes in the way global payments are conducted. And we have just scratched the surface.
This is a clarion call especially to the unorganized sector dealing in cash to hasten their migration to the digital bandwagon. The colossal pull factors- consumer demand and adoption well matched by governments push is almost a resolve to make digital transactions a norm rather than an aberration.
These factors are making India an exciting digital payment laboratory. The most motivating scenarios are the ones in which the newly inducted consumers in the financial mainstream demands one-touch ease of transactions through the ubiquitous mobile phones.
Digital India, Jan-Dhan banking accounts, Aadhar based welfare delivery and an unyielding drive towards formalization of transactions have been the keystone of the current government’s policies.
Demonetization, a surgical strike to purge the blotched system of a paper economy that abets tax evasion is perhaps the best example of the government’s iron will towards a cashless and digital economy.
Initiatives such as Digishala the National Optical Fiber Network (NOFN), Unified Payment Interface (UPI) and the Bharat Interface for Money (BHIM) app are accelerating the transition towards a cashless economy. These initiatives have given an impetus to the emerging digital transactions sector in India.
According to Morgan Stanley, the smart-phone sales are growing at the rate of 20% and its user base is likely to reach 500 million by 2020. With mobile data becoming dirt cheap, the digital transactions have grown by 50% annually, leaving ATM activities to a 15% growth.
In the past, the banks had ascendancy over transaction services. Now with the emergence of new fintech companies and payment banks, the landscape is far more competitive. Now telecom companies, banks, mobile wallet firms, and payment banks which are budding as alternative transaction gateways are making the customer hold the strings of the theatre, while companies are clamoring to vie the customers with innovative services which benefit the customer.
The tech leapfrog into IoT
Whether through payment gateways, mobile wallets, bank accounts or PPIs (pre-paid instruments), Indians are moving to e-commerce for both large and small ticket size purchases. With e-commerce becoming the primary marketplace, the payment service companies will have access to a mindboggling amount of transaction data and purchase patterns.
This data can help everyone in the value chain from sellers, marketers, and payment firms-to design customized offerings. This also becomes an ideal platform for businesses and banks to cross-sell their products. This can work in conjunction with merchant apps, creating a seamless omnichannel experience.
As customers transition into cashless payments, there comes the leapfrog technology of IoT into play to reshape the payment landscape.
The Internet of Things (IoT) brings new ideas, threats, and opportunities for payments and e-commerce. IoT is an internet platform where physical devices, vehicles, gadgets, and assorted appliances can interact with each other over the web and exchange data. IoT is growing exponentially. Connecting devices increases the ability of customers to pay and accept payment from many devices connected over the fog of the network (IoT).
These connected devices can trigger a transaction by sending real-time alerts. For example: If the car has a part that needs repair or replacement, the IoT connected car can prompt a replacement request to the connected vendor and book an appointment for service and repair only waiting for your ‘Press Enter’.
You complete the cycle by processing the request and paying for the transaction by the connected payment method. This auto-debit system could help the government collected entry-exit taxes, Octroi and tolls in a seamless manner if all the vehicles were on the IoT.
The new payment devices can be connected cars, household appliances, and wearable. This also means many more touchpoints for retail sales including the parking meter, vending machines, shopping carts, etc.
Thus the future of digital payments will have to expand not just to accommodate the stratospheric increase in volumes, but in accepting many modes and devices for transactions. Payments systems will thus have to be designed as an inclusive ecosystem incorporating as many players, customers and connected devices of daily needs as possible.
It will be the power of collaboration among people, banks and telecommunication companies and communication between systems and devices which will usher in the ‘OTP’ as the new grammar.