Contribution of Digital payments to Digital India is at the cusp of a revolution

Mobile telephony has changed the landscape of a country where traditional landlines were considered a luxury and only the privileged could afford a few decades back. Mobile telephony has revolutionized the way we stay connected by providing us seamless communication round the clock.

Due to an unprecedented rate of consumer adoption, almost every adult Indian possesses a mobile phone today and we can safely say that the digital transition of India - with more than one billion mobile users - truly happened on mobile rather than the traditional computer. With over 90 per cent of the country covered by telecom networks, the mobile phone phenomenon, in my opinion, is the single biggest contributor to Digital India.

Digital payment platform contribution to Digital India

The mobile money market although in a very early stage of its evolution has shown all the signs of a robust and game changer. The mobile banking transaction grew by 4,000 per cent in value terms and over 500 per cent in volume terms from 2012 to 2015. A large number of players and competition amongst them is driving usage and product related innovation. A healthy ecosystem of fintech companies, wallet players, merchants and billers is the driving force behind this success. 

Indian wallet transactions over the last 3 years by value and volume have grown by over 500 per cent to reach $551 million and 2.6 billion respectively in 2015. In India nearly 95 per cent of all transactions are cash based, signalling huge opportunity and upside to this growing usage of mobile phones for financial transactions.

Propping up of PoS machines in toll plazas, mobile wallet payments accepted by sundry merchants and the reduction of cash, whether by choice or by compulsion are significant steps towards a digitally enabled India.

Digital payments and mobile wallets contribution to Digital India is at the cusp of a major revolution. Digital payments have generated a massive curiosity in India since November 8 announcement of demonetization by our prime minister. Currently, there are over 200+ million active mobile wallets with over 75 million transactions every month and payment throughput of over Rs 2,000+ crores of payments is being processed across the country. 

Obstacles which need to be removed on mobile phone for meeting the objectives of Digital India

The challenges on the mobilephone side are primarily related to the type of phone; i.e. feature phone or smartphone, connectivity and user literacy. The 

smartphones are preferred, as through the feature phones the options are either through SMS or USSD. SMS is not considered secure and USSD is at best cumbersome to use when more menu options are at play.

Smartphones are rapidly replacing old handsets but there are still a significant number of old phone users at the bottom of the pyramid. Connectivity is an issue in smartphones. If it is going to be through 3G and 4G connectivity, the quality of services and availability of requisite bandwidth are areas that will require greater focus.

On the first challenge of connectivity and availability of seamless connectivity, the drive both from government and telco operators has been to improve on coverage. This has become the most important objectives of telcos.

The second challenge has been availability of affordable 4G smartphones. India currently has over 300 million smartphones and over 400 million broadband users. The big challenge currently faced is availability of 4G 

smartphones which cost less than $50 and there is a huge scope of improvement in this area.

The third challenge is creating digital awareness and spreading digital knowledge which is already going on full steam. Government has already joined hands with private players to spread this awareness and address this challenge.

Obstacles which needs to be removed on digital payment front for meeting the objectives of Digital India

Looking at the variety of users and their proficiency levels, user friendliness becomes important. Enablement through language options is a primary obstacle which needs to be addressed urgently.

Educating the users how to use various apps or menu options to accomplish tasks is an ongoing process. For this, the apps needs to be intuitive and also provide support at hand when required, through FAQs, call centers etc. 

The government has started various campaigns and messaging across the nation on spreading awareness of digital payments and has joined hands with private operators in this quest to get more and more users to try the ease of making digital payments. 

Countries which have done extremely well on mobile phone/digital payments platform and what are the learning’s for India?

The primary learning for India are in the following fields: Where all mobile payment services can be effectively implemented; and getting the legal framework right; regulating new financial services technologies. The big learning for India comes from the Africa continent. Countries such as Kenya and Nigeria are the first adopters of digital payments and mobile wallets in the world. 

Role of security both in the mobile phone ecosystem and digital payments platform for meeting the objectives of Digital India 

Security is a crucial aspect in mobile payment, payment using Near Field Communication (NFC) or other contactless technologies and CNP payment scenarios. India has a very robust network for these applications and very tight velocity rules are mandatory in mobile payments. 

There needs to be a focus on improving not just the period when the consumer is involved in the payment portion but the overall commerce process. Retailers, both in-store and online, are now experimenting with new goals that move towards a ‘frictionless experience’, where the consumer needs to enter as little authentication data manually, as possible. Accordingly, the pressure falls on banks and fintech solution providers to create an iron clad security mechanism albeit behind the scenes. Recognizing the difference between digital payments, compared to legacy payment methods, is essential for innovative new payment methods to prosper without the security hiccups.

Pravin Prashant
pravin@varindia.com