High MDR as high as 0.65 - 2% of transaction costs is one of the biggest bottlenecks

Digital India is one of the signature campaigns of prime minister Narendra Modi to link the entire nation with the threads of Internet. According to information technology and communications minister, Ravi Shankar Prasad, nearly $400 billion of this $1 trillion will be added from the manufacturing of mobile phones and solar panels in the country. This explains the contribution of mobile phones to Digital India.  

Mobiles and mobile applications have emerged as catalysts for rapid economic growth and citizen empowerment across the globe.The government is taking steps to ensure that by 2018 all villages are covered through mobile connectivity.

Digital payment platform contribution to Digital India

Increase in mobile phone usage in tier 2 and tier 3 cities has seen an increase in digital payment. People are more comfortable making cashless transactions than carrying cash in their wallets. After the demonetization policy introduced by government, more people are using the digital wallets for their day to day needs. Jugnoo has always supported digital wallets and has tie up with Paytm, Freecharge and Mobikwik to help its commuters pay through wallets. Around the demonetization, Jugnoo witnessed a spike in usage of cashless transaction by over 100 per cent. Adding to the initiatives taken by Jugnoo to boost e-money usage, we also launched our UPI enabled payment app – Jugnoo Pay which will allow direct transaction of money from bank accounts. 

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

High Merchant Discount Rates (MDR) which are as high as 0.65% - 2% of transaction costs are one of the biggest bottlenecks. MDR costs need to reduce to 0.1% levels to increase adoption of digital payments. USSD charges need to be reduced to 1 paisa level instead of the current 50 paisa level. Even education is needed from banks so that more users link their phone numbers with bank accounts. 

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

On the mobile phone front, common minimum guidelines for UPI apps need to be defined so that user interface has a minimum common workflow. UPI distinctions for Peer to Merchant (P2M) and Peer to Peer (P2P) payments are confusing. P2P is simpler and should be promoted more. Further, we need to quickly release UPI SDKs for iOS and web platforms. 

Countries which have done extremely well on mobile phone/digital payment platform

Kenya has done a tremendous job in mobile payments through M-Pesa platform. The adoption in Kenya happened because of dangers in carrying cash but it clearly shows that it is not a far fetched dream to do all the payments through mobile phones. In India, demonetization has provided us a jumpstart to leapfrog to mobile payments as these opportunities come rarely so we should utilize them maximum. 

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

With the increase in usage of mobile phones for day to day activities, the issue of cyber security has increased. Usage of mobile wallets, shopping on e-commerce sites, etc. also expose the consumer’s personal information therefore, it becomes important for the mobile phone eco-system and digital payment platform to secure sensitive information. 

Pravin Prashant
pravin@varindia.com