How India is likely to make e-wallets and cards obsolete
We all are living on the cusp of change. Every disruptive technology or innovation is bringing in a change in the way we live or work. Some changes become significant over the course of time while some die out with time. The changes that stay long are the ones driven by strong forces such as social values, cultural values, technology, political and regulatory and so on. When these changes are driven by strong forces, new behaviours and new ways of living emerge. You are not left with any option other than embracing those changes. On my recent visit to India, I experienced a major change which is driving India to a digitized less cash economy.
To combat black money and money laundering, Indian government under the leadership of Prime Minister Narendra Modi demonetized Rs. 500 and Rs. 1000 bills, the most circulated bills in the market. This move caught many black money holders off-guard. Though the debate is still on whether this move will have a long-term negative impact on the Indian economy when majority trades in India happens in hard cash and infrastructure for cashless transactions is yet not in place across India, but this move has brought a consequential change in the way people make payments. From kirana stores to multi-brand retail stores, from street food vendor to multi-cuisine restaurant, from Rs. 5 to Rs. 500, PayTM and other similar mobile wallet apps have enabled people to experience a cashless way of making payments like never before. The lucrative credit card and debit card plans with cashback and redeemable points have not been able to push India to make cashless payments in all these years. For the low card payment adoption rate, one may point to the fact India has one of the lowest number of card swiping machines or point-of-sale (POS) terminals per capita in the world. But even then people in cities with high POS terminal density made majority payments in cash. Similar to the challenge of making people use Apple Pay more often to make payments, these new behaviours require a strong push to become prominent in people. Apart from being hesitant to use cards to make payments, there were no behavioral cues to prompt the customer to make the payment through cards. Due to the demonetization, the crunch for currencies of lower denominations pushed people to move to card based or mobile based payments.
Are cards and e-wallets the only way to become a less-cash economy?
In this recent change, the increasing no. of smartphone users and internet users in India facilitated the adoption of mobile e-wallet based payments and paved way for more innovations in the mobile payment space.
India with its three innovative services is likely to make cards and e-wallets obsolete.
1. UPI — Unified Payments Interface is an online payment system which lets you transfer money to anyone by knowing their mobile number or VPA (Virtual Payment Address). The amount is deducted from your bank account and credited directly to their bank account. You can make and receive payments any time of the day instantly. The two biggest benefits are that you don’t need to add the beneficiary first to make the payment and the money is not stored anywhere in the wallet. Since the received money is not stored in wallets, you save transfer fees on transferring money from wallets to bank accounts and avoid losing the interest from the bank if the money is stored in e-wallets. One can use UPI through their bank’s apps or through BHIM app, a UPI dedicated app developed by National Payments Corporation of India (NPCI). It is an ideal app for rural India or for a non-technical user with dead SIMPLE and very INTUITIVE user interface. The app can only be linked to one bank account and to one mobile no. which is registered with that linked bank account. Further to make the app fool-proof, the mobile no. must be active on the phone in which the app is being installed and the recipient of the payment must also be a BHIM user.
2. AEPS: Aadhaar Enabled Payment Service is an Aadhaar (A centralized database of biometric and demographic data of residents, identified by a 12-digit unique number) based digital payment mode. A user only requires his or her Aadhaar number to make a payment. The system deducts money from the bank account to which the user has linked his/her Aadhaar number and credits to the credited to the payee’s account directly. It doesn’t require the user’s signature, bank account details or any password rather it uses the fingerprint as a password.
3. USSD banking or *99# Banking: It is a mobile banking based digital payment mode which doesn’t require a smartphone or internet connection. One can easily use it with any normal feature phone to make payments. It works as a bridge between your telecom operator’s server and your bank’s server and uses your registered mobile number to connect with your bank account.
The above mentioned three services are in their early phases of development and deployment with a huge potential to revolutionalize how payments and banking are done. There are concerns about data security, app security, stable internet connection, just like with any other new product or service in the way but they can be solved as and when more and more usage happens and real world use cases emerge. In a country like India where bringing a behavioral or attitudinal change is a humongous task, this change has been welcomed without much friction by the citizens as it is enabling them to go wallet-less. Infrastructure is another roadblock which the country is working towards through different schemes and plans.
Vision for the desired future must not be driven by what infrastructure is possible rather what infrastructure must be created. Hoping to make 100% cashless payments on my next visit to India.