In December 2017, the National Payments Corporation of India reported that there were 1.06 billion digital payment transactions in India –the first time the Billion mark had been hit. The digital payments industry in India has seen many massive changes over the last year, post the demonetization drive and 2018 is set to be yet another promising year.
According to the EY’s 2017 Fintech Adoption Index, India ranks 2nd at 52%, just behind China at 69%, when considering the percentage of the population who are digitally active. However, India could overtake China in a few years, given the pace at which digitization is progressing in every sphere of life and work in India. The Indian banking system is also shifting towards a cashless system. This is creating tremendous opportunities for technology-based investments into the digital payments infrastructure. Some trends, already visible today, will drive digital payments forward to even faster growth in 2018.
Unified Payments Interface(UPI) offers the most advanced, economical and secure mechanism for instant money transfer for P2P and P2M forms of payments. With the growing adoption of UPI banks will be able to provide more value-added services to customers and also assist in building a transactional ecosystem for the merchants. Payments can be made directly to bank accounts, without needing cards or wallets are likely to increase further and this could transform the digital payments space.
Banking transactions and payment process will become faster and less complex with standard API’s exposed by the banks. Digital identification of Aadhar with India Stack that offers standard API will help in driving the growth of digital payment systems.
A joint Google and BCG study predicted that non-cash transactions, which now make up 22% of all payments, will overtake cash related transactions by 2023. Clearly, there will be a rise in digital payments instruments for making non-cash payments over the coming year. According to IDC, the usage of digital payments instruments year on year has vastly improved with the volume of transactions increasing from 32% in 2013-2014 to 62% in 2017-18. Technologies such as smartphones, biometrics, wearables. cloud computing, and IOT will make digital payments much simpler and make it easy for customers to transact in the future. Innovative use cases are also taking root – like using digital means to pay for goods and services being delivered to the home. eCOD as an option to COD is already becoming popular.
There will be greater reliance on the use of predictive analytics by businesses to provide tailored solutions to customers to meet their specific needs and requirements. Artificial intelligence is also likely to impact the payments industry. Data analytics together with AI will play an increasingly important role in alternate lending, credit scoring and crafting personalized payment flows.
Further, AI will be applied for customer servicing, which presents huge opportunities for retail banks for increasing automation and reducing the cost of serving their customers. Chatbots are already being deployed by many banks for improving customer interactions. In 2018, the focus will be on providing improved personalization of customer services, where AI may be used to offer suggestions and recommendations to customers by banks to assist them in making smart money management decisions and allow for greater cost savings.
Privacy and Data security are firmly in the public eye. Secure transactions and safeguarding data will become the top priority of the digital payments industry. Technologies such as Blockchain, which was used as a way to secure cryptocurrency transactions, will see increased application in making peer-to-peer digital payments more secure and seamless. Online authentication with biometric capabilities offered through mobiles can play a role in enhancing security to ensure that the transaction is only accessible to the primary user of the device.
Data protection and recovery mechanisms will see more improvements, which will help businesses to have greater control over the customer data at their disposal and enable them to be better prepared to handle any sort of data breaches. International corporations are already aligning themselves with the EU’s General Data Protection Regulation (GDPR) and we should expect to see more government regulation and potentially intervention in this space following The Supreme Court’s decision protecting the “Right to Privacy”.
Jose Thattil, CEO of Phi Commerce says, “Businesses need to pay greater attention to the growing customer preferences, demand for convenience and address their concerns about security to offer them a robust and safe platform for conducting digital payment transactions. The digital payment landscape is changing rapidly and its essential that enterprises act fast and make use of the available resources and innovation in technologies so that they are not left behind in this digital race.”