{"id":49916,"date":"2019-07-16T19:00:48","date_gmt":"2019-07-16T13:30:48","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?p=49916"},"modified":"2019-07-16T16:13:39","modified_gmt":"2019-07-16T10:43:39","slug":"7-pm-creating-a-fair-digital-payments-market-16th-july-2019","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/7-pm-creating-a-fair-digital-payments-market-16th-july-2019\/","title":{"rendered":"7 PM | Creating a fair digital payments market | 16th July, 2019"},"content":{"rendered":"\n<p><strong>Context<\/strong>: National\ndigital payments market and its potential in India.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The\ngrowth of financial services in India has largely been led by the banks. The regulator\nas well as the banks has led the initial thrust, development and support of\ndigital payments infrastructure and systems. Non-banks have entered the market\nand expanded the range of payment services available to the Indian consumer\nbacked by their strength in technology and customer centric innovation. This\n\u201cbest of both worlds\u201d approach, which has resulted in a recent growth in the\nnumber of digital payments, should continue.<\/li><li>The\nPayment and Settlement Act, 2007 has defined Digital Payments. As per this any\n\u201celectronic funds transfer\u201d means any transfer of funds which is initiated by a\nperson by way of instruction, authorization or order to a bank to debit or\ncredit an account maintained with that bank through electronic means and\nincludes point of sale transfers; automated teller machine transactions, direct\ndeposits or withdrawal of funds, transfers initiated by telephone, internet\nand, card payment.<\/li><\/ul>\n\n\n\n<p><strong>Need\nand scope of digital payments market in India:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Untapped potential:<\/strong> India,\nwith a large share of 48% of the world\u2019s unbanked and financially underserved,\nclearly is a critical frontier for digital payments. <\/li><li><strong>Growth\npotential:<\/strong>\nOver the last few years, the digital payment space has grown quite well in\nIndia with 400+ organizations working on creating and capturing value in online\ncommerce. India\u2019s digital payment industry, which is currently worth around USD\n200 Billion, is expected to grow five-fold to reach USD 1 Trillion by 2023, as\nper a report by Swiss financial services holding company, Credit Suisse.<\/li><li><strong>Smart phones:<\/strong> studies had estimated that\nthe number of Smartphone users in the country had been steadily rising through\nthe past decade, and would continue to do so. In 2015, a little over an\nestimated 199 million people in the country had Smartphone\u2019s, or about 26.3\npercent of all mobile users. That number was expected to climb by 100 million by\n2017, and hit 340 million last year. In 2019, we can expect almost 374 million\npeople to own a Smartphone, about 39 percent of all mobile users. By 2022, it&#8217;s\nexpected to hit 442 million Smartphone users in India.<\/li><li>Smartphone\u2019s\ntoday are equipped with capabilities such as enhanced processors, high capacity\nstorage memories, NFC, resolution cameras, etc. They are no longer only communication\ndevices; rather they are becoming commerce enablers. Emergence of smartphones\nhas enabled development of new payment technologies.<\/li><li><strong>Block-chain:<\/strong> The advent of\ntechnologies like blockchain, machine learning, bots, cloud, crypto currencies,\netc., is exploring development of new financial technologies. The business\ndelivery and architectural models are changing due to these technological\nmovements. Block chain may overhaul how financial services firms operate,\nmigrating from centralized to decentralized models of conducting business and\noperations. It may reduce the cost of various financial activities to near zero\nespecially where it involves third parties.<\/li><li><strong>Minor transactions:<\/strong> An interesting angle to India\u2019s digital payment story is that\nit is going to be dominated by micro transactions (tractions of value lower\nthan Rs 100). In fact, 50% of person-to-merchant transactions are to be\nunder&nbsp;Rs100 says the Google-BCG report. Alternate digital payment\ninstruments like digital wallets, UPI, payment banks, Bharat QR are expected to\ngrow fiercely and estimated to double their contribution to 30 per cent in the\ndigital payment industry.<\/li><li><strong>Government\ninitiatives:<\/strong> Over the last few years, the Government of India has taken\ncopious pre-emptive measures to explain, establish and encourage the use of\nSmart Card payments in various sectors of the Indian economy. The launch of\nDigital India is a major thrust to the Indian economy. Truly, \u201cFaceless,\npaperless and cashless\u201d. Demonetization of INR 500 and INR 1,000 currency notes\nand the subsequent policy measures taken by the Government of India (GOI) and\nthe Reserve Bank of India (RBI) have provided further impetus to digital and\ncard payments.<\/li><li><strong>Mobile\nwallets:<\/strong> The digital payment industry growth will be led by the\ndigital\/mobile wallets. According to the Capgemini\u2019s World Payment Report,\nmobile wallets will witness a compound annual growth rate (CAGR) of 148 per\ncent over the next five years and will be $4.4 billion by 2022.<\/li><\/ul>\n\n\n\n<p><strong>Issues related to digital payments system in India:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Behavioural factor:<\/strong> <strong>In a developing country\nsuch as India, people would rather carry bulky bank notes than pay extra just\nfor using digital payment methods.<\/strong>&nbsp;Demonetization\npushed Indians&nbsp;towards switching to cashless\nmethods which come with veiled costs galore, but as soon as the pressure\nreduced, Indians were back to using cash. <strong>The cash in circulation as of&nbsp;June 22,\n2018, was only 9.8% more than it was on June 23 in 2017.<\/strong>&nbsp;This\nindicates that even though there is a greater appetite for digital payments\nsystems, the Indian economy continues to be heavily reliant on cash.<\/li><li><strong>Infrastructure problems:<\/strong> Continued\ndependence on cash persists due to certain challenges deeply rooted in the\ndigital payments ecosystem in India. These ingrained issues can be largely\nattributed to a lack of adequate infrastructure. In the current scenario,&nbsp;<strong>digital payment systems\nare heavily reliant on smart phones that are enabled with data connections,\nNFC, Bluetooth etc<\/strong><strong>.<\/strong>\nOut of India\u2019s 800Mn mobile phone users,&nbsp;only 200Mn use smart phones. Of\nthese phones, only 6Mn are NFC-enabled. An even smaller percentage of users\nhave access to QR code mechanisms. This translates to approximately<strong>85% Indians who do not\nhave access to the infrastructure required to adopt the current digital payment\nsystems<\/strong>&nbsp;that are heavily reliant on smart phones.<\/li><li><strong>Data localization:<\/strong> majority of payment system like Visa and Master card and digital\npayments like Googlepay, Paypal and the data stored in their parent countries\nwhere no guarantee for data security.<\/li><li><strong>Risk of Cyber\nFraud:<\/strong>\nAs the digital channel in financial services continues to evolve, cyber\nsecurity has become a business risk, rather than simply a technical risk.\nSecurity breaches can damage reputations and destroy trust, thereby\njeopardizing the investments made in digital solutions. A single hack can\nensure millions of accounts being compromised, as it happened in October 2018\nwhen 3.2 million card details were stolen in a malware related security breach.\nThese cards from customers of State Bank of India, HDFC Bank, ICICI Bank, Axis\nBank and others were used at ATMs. The stolen debit cards were used in China.<\/li><\/ul>\n\n\n\n<p><strong>Measures\nto smooth transition to digital payments market in India:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Policy framework:<\/strong> Government\nhas a key role to play in ensuring that the digital payment sector delivers\nexpected growth in a secure and sustainable manner. To help build a strong\nfoundation, its policies and standards will need to be dynamic, flexible and\nbalanced. The Committee on Digital Payments constituted by Department of\nEconomic Affairs has recommended structural reforms in the payment ecosystem,\nincluding amendments to the Payment and Settlement Systems Act, 2007. So the\ngovernment should implement the committee recommendations wisely and early.<\/li><li><strong>Storage:<\/strong> In recent times,\nthere has been considerable growth in the payment ecosystem in the country.\nSuch systems are also highly technology dependent, which necessitate adoption\nof safety and security measures, which are best in class, on a continuous\nbasis. It was also observed that not all system providers store the payments\ndata in India. As recommended by srikrishna committee on data protection, the\ngovernment and RBI should frame the guidelines for data localization with in\nIndia.<\/li><li><strong>Fraud\nmanagement:<\/strong>\nTo improve customer confidence in digital payments, it is of utmost importance\nto keep a control on the number of frauds that occur, and to ensure that\ncustomers are not impacted. One solution is to ensure that all fraud incidents,\nincluding transaction details are reported to the regulator. This information\nmay be used to create a fraud registry. Real time fraud detection systems could\nuse this registry to rate the risk of fraud for users and transactions.<\/li><\/ul>\n\n\n\n<p><strong>Way forward:<\/strong> Industry\nexperts agree that the digital payments industry is entering its golden age and\nthose paying attention are able to leverage its disruptive potential to\ntransform entire nations. It is no coincidence that India, amongst the fastest\ngrowing economies in the world is banking on digital payments to be the\ncatalyst for its vision for a connected and prosperous India 2.0. Digital\npayments can enable greater economic growth, growth in international\ne-commerce, and aid in social and financial inclusion. Presently, India\nrepresents one of the largest market opportunities for payments. The population\nis eager to participate in the rapid evolving advancement in technology. So the\ngovernment should take proper measures to promote digital payments in the\ncountry.<\/p>\n\n\n\n<p>Source:<a href=\"https:\/\/www.thehindu.com\/opinion\/op-ed\/creating-a-fair-digital-payments-market\/article28448617.ece\">https:\/\/www.thehindu.com\/opinion\/op-ed\/creating-a-fair-digital-payments-market\/article28448617.ece<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: National digital payments market and its potential in India. The growth of financial services in India has largely been led by the banks. The regulator as well as the banks has led the initial thrust, development and support of digital payments infrastructure and systems. Non-banks have entered the market and expanded the range of&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/7-pm-creating-a-fair-digital-payments-market-16th-july-2019\/\">Continue reading <span class=\"screen-reader-text\">7 PM | Creating a fair digital payments market | 16th July, 2019<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":49370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130],"tags":[],"class_list":["post-49916","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-7-pm","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2019\/07\/7-PM.png?fit=1000%2C500&ssl=1","views":{"total":0,"cached_at":"","cached_date":1704762403},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/49916","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=49916"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/49916\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/49370"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=49916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=49916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=49916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}