The economical dynamics of India provide a unique vantage point which can be applied to examine tailor-made strategies for India. One of them being its move to envisage a cashless economy.
As we dawn upon a century, the crux of which is expediency and accessibility, the inception of a need for wireless connectivity is undeniable. As the notions of digitalization and e-commerce breezed through all segments of consumerism and financial services, they rustled leaves at the very foundation of economic activity, i.e., transactions. The inception of the digital age and its trails in e-commerce saw the emergence of new financial needs. It was also apparent, that orthodox and conventional payments systems could not fulfil the urgency for increased liquidity.
At the advent of this need for alternate method of payments, India was only able to adopt plastic money in 1987. Several parameters were made verticals across which the behavioural patterns of Indian customers were infused to ascertain the sustainability and acceptance of these pristine practices.
Advances in technology and increased efficiency of digital transactions provided a lead for atypical think tanks, free spirited entrepreneurs and existent financial institutions to venture out on a journey to explore more refined forms of digital currency. As the payments machinery was being restructured, it provoked one idea after another, in quest of a design that would facilitate both paramount convenience and economic viability. Payment gateways were curated in an exercise to map all parameters to a focal point. These included the adoptive readiness of the customers, security in transacting, multiciplity in payment options, easy integration, convenience and primarily, ease in understanding the platform.
Payment gateways rendered all traditional methods of settlement redundant as any e-commerce or digital product store that was set up, turned to a payments gateway provider in search of a platform that could cater to all their needs and effectively provide a comprehensive payments solution. The first gateway in India, CC Avenue, gained momentum and this was followed suit by other gateways that saw an opportunity to explore this market. An incredible verity came to light when PayPal penetrated the market for digital payments in India; even this segment was not going to be bereft of foreign competition.
A new wave flooded the digital payments market when digital wallets were introduced. The idea of transacting just at the snap of a finger had a great impact on consumer psyche. The illusion of enhanced liquidity coupled with increased rates of technology penetration (primarily smartphones) and the novelty of these wallets laid down the foundation for an increasing customer base.
Reckoning the success of digitized platforms during demonetization, the digital wallet market was flooded with competitors within two years of its launch, each one contending towards a significant market share. An interesting take on these wallets is to note how the neck to neck competition between these wallets has been beneficial for the customer groups on account of additional services, improvised interfaces, cash back offers, increased limit of transaction and credit and other perks. These wallets too, in quest of capitalizing on growing market avenues, amplified the area of their services at a dynamic rate, introducing payments by QR code scan, switching between online and offline mode of payment etc.
With all the flurry of activities in the payments landscape, both the users and providers of such services are at their toes keeping up with brainstorming developments. Assessing the changes in behavioural trends across various customer groups post these wallets, the providers of such services realized that the steer towards a cashless economy had begun. Fuelling this shift further, the Government of India launched the BHIM application, Bharat QR Code and UPI. This prompt was multifaceted – as it would ease the cash crunch after demonetization, help foster the formal economy, slacken corrupt practices and transform India into a digitally empowered nation.
Enhanced customer experience has been pivotal in changing the game for payment platforms. A major part of the adoptive readiness comes from the fact that the consumers don’t feel a pinch in their pockets immediately as the part where the cash has to be parted with, has been done away with. The catalyst for all developments in this field, have been the encouraging regulatory surroundings. To keep the digital inclusion program on track, there have been promising changes in the regulatory framework that include KYC relaxation, Bharat Bills Payments System, exceptions from two factor authentication and contactless technologies in the form of NFC transactions, bar codes and EVM credit cards are accelerating the surge towards a digitally driven economy.
Observing the prompt acceptance of E-KYC and biometric based consent, payments initiated by vocal commands is a concept that fintech firms should ally their resources to. This could do away with the task of entering card details manually and elevate customers from banking at fingertips to hands-free banking. Chatbots to address merchant/customer queries is another area that can be built a flexible user experience.
Having a secured plinth in the payments space, driven entrepreneurs and venture capitalists are looking to build on this by revamping the lending segment. This restructuring has the potential to storm through India’s window of opportunity. Application of Artificial Intelligence coupled with Machine Learning to enable push button extending of credit, I reckon will not only be a breakthrough but will also change the colour of the glass through which the common man looks at borrowing, and spending on credit. While one can always debate about the mammoth task of verification of documents and the regulatory requirements that are associated with credit, in hindsight, we possibly cannot ignore the development of “blockchains”. The system of blockchains that is still in the embryo stage can intensify digital footprints across India’s fin-tech terrain. It will cease the necessity for most regulatory systems as ledgers on all individuals subject to their chosen level of privacy and transparency would be available on a peer to peer basis. The onus of these systems to work in tandem would then shift to just consent.
Regardless of all such developments, the one concern that cannot be ignored is the safety and security in interlinking with these systems. Data breaches and the personal information divulged left uncheck, can pose a major threat to this market and could lead to its downfall along with the privacy of millions compromised. India has been taking steps to prevent the privacy catastrophe, with the Govt. of India and RBI working hand in hand to secure digital footprints and making sure that the verification process is airtight. However, it would be wrong to say that we should inhibit the transformation process as the pros outweigh the cons by a majority.
The future of digital payments in India looks nothing short of bright. This foresight is drawn in concern with the rise of millennia’s and the downward spiral of traditional banking systems and methods of payments. With speed, efficiency and convenience brought to their fingertips, customer groups nationwide are encapsulating this change and look forward to more such advancements. Though the digital payments scenario is still at a nascent stage, the process of digitally empowering India is underway.
About the Author
Ayushi Ahuja is an Analyst working in Strategy and Operations in ftcash- India’s leading digital loans and payments platform. A graduate in Economics from Loreto College, Ayushi has a keen interest in the digital payments and lending space having worked with multiple banks and institutions on initiatives focused on financial inclusion. In her spare time, she enjoys engaging with people over Graphology. She is Perseverant, enthusiastic and positive to all that comes her way – work, life, balance!