India scores in Flavors of Fast
The 5th edition of faster payments industry report, Flavors of Fast, from global fintech leader FIS, demonstrates how quickly the global payments ecosystem is evolving. Some of the highlights from the report:
When Flavors of Fast was first published in 2014, there were 14 live faster payments in the entire world. In 2018, there are 40 live faster payment schemes, 5 real-time schemes actively preparing for launch, and 16 more ‘on the radar’.
Despite the fact that more than half of India’s population remains offline, its real-time scheme now processes nearly 3 million faster payments transactions each day, up from 2 million a day in 2017. China now processes more than 25 million faster payments transactions a day, more than double its 2017 transaction volume. Economically significant regions like the United States (US) and Australia recently launched their first real-time schemes, and since its November 2017 launch, banks in more than 15 European countries, including Germany and the United Kingdom, have gone live with the SEPA Instant Credit Transfer (SCT Inst) scheme. Meanwhile, Hong Kong prepares to launch its faster payment rail in fall 2018, as the UK reconsiders the future of its modernized payments system and explores new frontiers of open banking.
IMPS STANDS OUT
India’s Immediate Payment Service (IMPS) continues to be one of the most sophisticated and evolved faster payments schemes in the world. It is the only scheme in the 2018 Flavors of Fast report to receive a ‘5’ rating – the highest possible rank – on our Faster Payments Innovation Index (FPII).
The growth in IMPS’ daily transaction volumes is partly attributed to the fact that India has embraced the smartphone as a payment vehicle, but primarily it is driven by the additional overlay services offered on top of the faster payments rails. These services are offered through the Unified Payments Interface (UPI), an overlay on IMPS that gives an application programming interface (API) to application developers, enabling the initiation and collection of payments.
In addition to the ubiquity of smartphones driving usage, the growth in UPI-based services has led to the creation of a wealth of new innovative payment solutions. The adoption rates of instant payments in India reflect this continuing evolution, with the use of app-based originated payments adversely impacting traditional debit and credit card usage volumes.
STRONG ROLE OF SOCIAL MEDIA
Much of the recent success of immediate payments in India is attributed to social media. More specifically, the speed with which people have accepted making payments through their social media platforms, rather than banking apps, has been directly responsible for much of the growth. Money transfer apps like Google Tez and Paytm payment services have added chatting features and chatting apps like WhatsApp and Hike messaging now enable money transfers; immediate payments are now built into the social fabric.
Social media apps are continuing to innovate with the use of QR code-based special offers that promote (sponsored) services at discounted prices. Promoting loyalty, merchants can offer temporarily discounted offers through customers’ preferred social media platforms in the form of a QR code. The offers can be tailored to individuals using behavioral analytics and geolocation.
With the continued development of online purchase tools and increasing consumer acceptance and confidence, India, along with other emerging markets, is driving the ongoing global acceleration of e-commerce spending. The proliferation of smartphones and tablets has proven a major driver of this growth. Consequently, India is seeing rapid development of new payment concepts and business structures based on mobile infrastructure initiated by online retailers and payment service providers.
THE QR RESURGENCE
A rebirth of QR codes is further driving the adoption of immediate payments in India, particularly for street sellers and taxi services. A stallholder can simply display a QR code which the customer scans, and the payment is done, instantly and virtually frictionless, with no requirement to carry a physical debit or credit card. The Bharat QR service, launched by the government of India in 2017, is an interoperable payment acceptance solution that supports Visa, MasterCard and Amex, and RuPay cards and BHIM-UPI for wider acceptance. Bharat QR code will enable rapid rollout of digital payments acceptance infrastructure throughout the country, as it does not involve any upfront investment in a pointof-sale (POS) device. The Bharat QR code service also supports dynamic QR codes, which may be printed on electricity bills, gas bills and other utility bills so customers can easily make payments to the respective vendors. The recently launched India Post Payments Bank has replaced the ATM/ debit card with a QR card that bypasses the ATM network for cash withdrawals.
We expect the volumes of faster payments to continue growing in India for at least the next five years, driven largely by the increasing presence of technology giants into India’s digital payments space, and the open architecture and interoperability that UPI offers.
To download the full report, visit: