The Covid-19 pandemic has done more for digitising payments in India than what demonetisation achieved, and the digital future is here to stay, said the brightest minds at Business Standard’s fintech webinar.
Demonetisation gave a huge push to India’s digital payments ecosystem initially. However, the pandemic has given a strong boost to the payments ecosystem. What otherwise would have taken 5-10 years to achieve, the pandemic has done in just five months, said panelists at Unlock BFSI 2.0, the second of many webinars on banking, financial services and insurance, moderated by Business Standard's consulting editor, Tamal Bandopadhyay.
The panelists concurred that the pandemic has presented them with huge opportunities, but there are challenges too, to overcome.
T R Ramachandran, Group Country Manager India & South Asia of Visa, said, “Each of us are excited about the decadal opportunity for digitisation.”
Manish Patel, Founder & CEO, Mswipe Technologies, said, “There are challenges in payment industry, and some of those need to be addressed.”
Apart from accelerating its evolution in India, Sameer Nigam, CEO, PhonePe, said, “Covid has been very helpful in customer acquisition, even more than demonetisation.”
WhatsApp, which has a huge customer base in India, is looking to foray into its digital payments space for a long time now, but the foray has been delayed. However, WhatsApp Pay is now all ready to launch its service after complying with the data localisation parameters prescribed by the regulator.
Speaking on the the competition ahead, Sajith Sivanandan, Managing Director and business head, Google Pay, said, “There is no more competitive sector (than payments) and no more competitive country than India. When more players enter into the ecosystem, then automatically there is growth.”
But, while there will be growth, it may not be a smooth sailing for new players.
“I would like to see WhatsApp enter sooner than later. In Payments, the first mover advantage is really not that relevant. I am not very bullish on people opening up their purses for every kind of applications they use. I don't think it (WhatsApp's entry) is a cakewalk, I don't think it is threatening,” said Nigam.
While there are so many payment services providers, life is still difficult for the merchants. But, change is eminent, both for customers and the ecosystem.
Patel said, “The merchant discount rates (MDR) on debit cards is extremely low, but in credit cards the MDR is high. That’s why the merchant doesn’t want to accept credit cards. We have a product - bank box - where the merchants don’t have to pay any kind of fee. This industry is going to continue to change.”
The urban population and centres have made a smooth transition to digital payments, but Bharat is still behind. Patel said, “As credit on UPI becomes operational, that is when we will see penetration in the rural landscape.”
"When they talk about tapping Bharat, offering sachet size products is important and has started happening in insurance and payments," Nigam said.
But, the industry will have to take a few more steps to increase awareness and confidence.
Rajesh Mirjankar, MD & CEO, Infrasoft Technologies, said, “Digital literacy has to start with educating customers on what are the pitfalls of not following right security mechanism.”
Advocating the need for democratising credit, where all sections of the society have equal access and not a select few, Ramachandran said, the Open Credit Enablement Network (OCEN) democratises the whole consumer lending process as there is no information arbitrage like a large bank has. Plenty of Fintechs will hitch their wagon to OCEN in the next 36 months, he added.
At a time when smart phones have become the new payment mode, plastic cards (debit & credit cards) may lose their relevance in the coming years. Amid this, Visa said it is no longer just a card network. Card is just a form factor. Whether web or mobile based payment, they facilitate all network of money movement.
“We are punting on technology of "tokenisation”." We are aiming to tokenise credentials and put it in a mobile phone. There are going to be 20 billion Internet of Things (IOT) devices and think of all these becoming payment instruments speaking to each other. That's the vision of a network we are planning for,” Visa's Ramachandran added.
While banks today have embraced digitisation wholeheartedly, even the ones who seemed cagey initially, panelists unanimously agreed that it is time the country gave space to a completely digital bank.
“The current licenses of small finance banks and payments banks do not make much sense to most Fintech players,” said Nikhil Kamath, Co-Founder & CIO, Zerodha.
Some though cautioned that while it is very easy to give money digitally in India, receiving money (digitally) is a whole new kettle of fish.