Indian consumer is no longer ‘No touch- No buy’.
Over a period of 10 years, customers have switched preference from cash to card to online wallets. The Internet and Mobile Association of India (IAMAI) in a report earlier this year had predicted the Indian digital payment industry to reach INR 1.2 lakh crores by December 2014 as compared to INR 85,800 for the same period last year.
One thing is for sure that customers are open to new ways of shopping for products and services. But that’s established now. But what’s the future of the payments space in India looking like?
There are a few key trends you will see in the market in 2015:
Biometric Based Payments
In November last year the RBI had mandated card swipe machines at the Point of Sale to be fitted with biometric scanners to enable the Aadhaar authentication in order to ensure security in card-based payment transactions. The directive was later scrapped due to high infrastructure and maintenance costs.
However, biometrics is definitely the way to go in the future to ensure safety in card transactions. In certain countries, biometrics are being used to secure mobile based payments. Apple introduced the fingerprint password in its Apple Pay, where checking out requires users to touch their finger to the iPhone’s fingerprint sensor to approve the transaction. As biometric technologies mature, consumer perceptions, experience and acceptance will decide the integration of this technology for securing online payments. And there is no greater fingerprint database than Aadhar. It’s a great step in the right direction and we hope to see it work in 2015.
Tap and Pay (NFC Cards)
Apple Pay – an iPhone feature which turns the phone into a digital wallet uses the Near Field Communication (NFC) feature for payments. Under this, the user taps his phone (stored with encrypted card information or emulated card information) instead of swiping the card.
This technology is sure to catch up in India as the Indian Banks introduce the solution. State Bank of India seems to be on its way to introduce it first this year. Once there are enough cards in the market, Tap and Pay will not only make transactions faster and also help the payments ecosystem, by encouraging more mobile based payment solutions applications.
Card on Delivery
The Diwali festive season saw an increase in the card payments on both the online and PoS centres. And then there is ‘Cash on Delivery’. A huge hit with the users of Flipkart, Amazon and the likes. 2015 will see ‘Card on Delivery’ takeoff and help add to the growth of the online retail market. The factors attributed to the rising popularity of the ‘Card on Delivery’ are the security on electronic payments and the maturity of the current consumers along with increasing transaction value for these purchases. Would you rather pay for a mobile phone with cash or card, especially if the delivery guy can accept cards?
These might also be a game-changer. It is hassling to complete a transaction with the two factor authentication processes in place today in India. Currently, the customer needs to go through 2-3 screens before he can authenticate his payment for the transaction. While it has helped reduce fraud, Indian e-commerce sees 15% of customers dropping out on second factor authentication screen. A ‘Prepaid Wallet’ could bring about a real overhaul in the way online payments are made. With RBI relaxing the KYC norms for a monthly transaction limit of <INR 10,000 for prepaid instruments, the underutilized payment mode has received a great boost.
Prepaid wallets could have the most optimum UX, because the entire control of the customer’s payment experience lies solely with the issuer. The only challenge to be addressed will be to gain consumer’s confidence to keep money with a non-banking entity. If that is gained then one can see a lot of innovations around peer to peer money transfers as an example using this core instrument. Having said that, companies like Ola, Meru, Uber etc. have embraced digital wallets for India.
One Click Check-Out
It’s strange, on some sites it’s mandatory for a customer to register for making a purchase, which puts him off the shopping flow and creates unnecessary friction. Customers today want a fast checkout experience without having to store their data on each site, when they are not even sure if they will ever return to that site again. The need of the hour is a 1-click checkout across merchant sites with single ID. This reduces the need for repeated data entry on each site and provides for a faster glitch free checkout experience with greater trust and card data security.
Banks have witnessed unauthorized transactions worth many crores in the past years. They have had to even resort to recalling of cards after a cloning scare. To avoid such mishaps in future, RBI has made punching of the 4 digit ATM PIN number mandatory at every PoS terminal where debit/credit cards are swiped. Alongside, the Apex bank also issued directives to the banks to issue chip based cards to the customers. These cards will also require your PIN for completing the transaction.
For online transactions safety RBI has made the 3D SecureCode also known as ‘Verified by Visa or MasterCard Secure Code’ mandatory. Customers have to use this verification PIN code apart from the CVV number for making purchases making a 2-layer security cover for transacting online. We can expect more regulations in this regards in 2015 – Aadhar based payments, NFC and Host Card Emulation are some of these.
The future of payments is definitely digital. Enabling seamless, cardless commerce in a more secure environment than the existing system of magnetic strips and password based authentication is what will define the online payment prospects. Biometrics, NFC are the technologies to look out for in establishing a trusting and secure mobile payment eco-systemresulting in more bills and receipts and less transaction failures.
About the Author
Siddharth Arora is the Founder and CEO of ePaisa Services, which was recently shortlisted for the Red Herring Award – Asia and Global. With a total experience of almost 13 years, his degrees and certificates from institutes like IIM Ahmedabad, Stanford University, UCLA and University of London have given him a vision supported by know-how to operate on global scale.
Disclaimer: This is a contributed post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of iamWire and the editor(s).
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