Digital Payments: Act II
With increased internet penetration, merchant acceptance network is trying to catch up with newer methods of digital payments.
THE INDIAN ECONOMY has traditionally been dominated by cash, but with increasing internet penetration and rising availability of smartphones, many Indian consumers have shifted to digital payment modes. There are now various ways to make online payments and transfers — credit card, debit card, Net banking, bank transfer modes, e-wallets, and Unified Payments Interface (UPI) BHIM. According to Deepak Chandnani, Managing Director, Worldline South Asia and Middle East and Managing Director MRL Posnet, “There are two parts to this innovation – the frontend and the backend. The frontend is the form factor and the backend is the technology that enables the payments. On the frontend, the avenues for a person to make payments are expanding from cards to mobile phones. On the backend, technology is enabling real-time inter- operable payments, especially on the mobile.” Introduction of these digital modes has made transactions convenient for customers, merchants and vendors. “While cash and digital can co- exist and thrive, digital payments have been growing at a faster clip over the last few years,” says Ravi B. Goyal, CMD, AGS Transact Technologies, an online payment systems provider. For wider acceptance, both ends of the system — frontend and backend — have to develop.
NEW MODES OF PAYMENT
Apart from cards, Net banking, bank transfer options and e-wallets, a new method of digital payment has emerged and is gaining strength. The government’s Bharat Interface for Money (BHIM) mobile app allows for transactions using the UPI. BHIM allows users to send or receive money to or from UPI payment addresses, or to non-UPI based accounts by scanning a QR code with account number and Indian Financial System Code (IFSC) or Mobile Money Identifier (MMID) code. Unlike mobile wallets (such as
Paytm, MobiKwik, mPesa, Airtel Money, etc.) that hold money, the BHIM app is only a mechanism of transfer. Transactions on it are instant and can be done 24*7. BHIM allows users to check the current balance in their bank accounts and to choose which account to use for transactions. Users can also have more than one payment address. If the 12- digit Aadhaar number is listed as a payment ID, biometric authentication or a prior registration with the bank or UPI is not needed.
Two more payment methods gaining popularity are Near Field Communication ( NFC) technology and QR code-based systems. But these require retailers to either upgrade or install new devices to gel with these new technologies. “India has nearly 1 million terminals that support NFC-based contactless card payments. India has rapidly become one of the largest contactless card-accepting markets in Asia. More than a dozen prominent acquiring banks in India have deployed approximately 1 million contactless card-reading devices in everyday acceptance locations across the country,” says Shailesh Paul, Vice President and Head of Merchant Sales and Solutions India and South Asia for Visa. However, he does acknowledge that contactless cards are facing challenges in scaling up.
While the Reserve Bank of India (RBI) gave its go-ahead for NFC-based contactless card payments in late 2015, there are still only about 20 million cards in circulation. Hence, creating awareness around usage