Though it has been more than a year since demonetization, the buzz around digital payments has not died down.
The government and the regulator have been preparing India for increased digital payments usage over the past few years.
Second factor authentication of Card-not-Present transactions and PIN at PoS(that ensuressecurity) have increased customer confidence in digital transactions.
The JAM trinity (Jan Dhan-Aadhaar-Mobile) that empowered people with bank accounts and debit cards linked them to AadhaarIDs and mobile numbers to ensure efficient direct subsidy transfers.
Demonetization, a revolutionary step,created an environment where people changed their payment preference from cash to digital modes like cards, wallets etc.
During this critical period, Banks deployed a record number of POS terminals so people could use their cards at locations where only cash was accepted previously.
Today, the government is incentivizing merchantsby eliminating merchant service fees on debit cards fortransactions below Rs. 2000, which is beneficial for micro-payments.
Some trends we are likely to witness in the coming months:
Bharat QR: A new form factor, Bharat QR enables retail payments by scanning a QR code with a smartphone.This is an asset-light acceptance mechanism being driven by the government. Today, usage of Bharat QR could be boosted through consumer awareness campaigns, incentive scheme for merchants and customers etc.
UPI (Unified Payments Interface): A game changer, UPI has helped accelerate P2P payments beyond one's expectations. A simplified digital account-to-account transfer, it requires a Virtual Payment Address creation either through a bank's mobile application or a third party app. RBI data shows 468.4 million UPI transactions from December to February. New players like PhonePe, Google Tez and soon Whatsapp can bring about a multifold growth in these numbers. P2M (Person to merchant) transactions will happen at retail stores as UPI is being provided as part of Bharat QR.
NFC (Near Field Communication): NFC devices are used in contactless payment systems. Banks have already deployed NFC-enabled terminals and are issuing NFC-based cards on select card programs. Mobile tap-and-pay should also find more acceptancewith early movers like Samsung Pay enhancing infrastructure and India estimated to have 530 million smartphones by this year.
Biometric payments This provides ease of transactingby providing a 12 digit Aadhaar number and authenticating it biometrically without carrying any form factor of payments and leveraging it with the existing Aadhaar Based Payment System (AEPS). If deployed extensively, it will help enable digital payments for the bottom of the pyramidthat may or may not have debit cards, but can easily make cashless payments through biometric authentication.
Avinash Luthria is a Business Head for Financial Processing & Licensing, at Worldline South Asia and Middle East.