Money Matters: An Objective Insight into the Global Payments Industry

This is a Guest Post by Sirish Kumar, CEO and Cofounder, Telr

mobile paymentsThe global payments industry today is a very dynamic entity. The sector has, on the back of the recent digital re-evolution, witnessed unparalleled growth across the world in the past couple of years. Several new areas of opportunities have been identified, while developing markets such as India, South East Asia, the Middle East and South America have become more accessible as a result of this boom. But what is the long-term outlook on the industry, particularly from the point of view of someone who has been a part of it?

For one, the move towards a digital-first approach that has been undertaken by the consumers as well as the service providers is very encouraging. Facilitated by an increased smartphone penetration, this migration means heightened convenience and instant service fulfilment for the consumer. On the other hand, the payments service providers benefit from factors such as greater consumer outreach, more insights, reduced costs, optimised operations and enhanced scalability.

At present, there are more than 1.91 billion smartphone users in the world, a number which is expected to cross 2.16 billion by the end of 2016. The total consumer spending facilitated through mobiles worldwide is expected to jump to $626 billion by the year 2018, according to a Goldman Sachs report. Nearly 66% of all web traffic in India during January 2016 came through mobile devices as compared to a global average of 39%, while the same statistic for Indonesia, Saudi Arabia and UAE stood at 70%, 55% and 49% respectively. When considered in tandem with the average number of e-commerce shoppers during the same time period, the resultant data becomes very interesting from the perspective of a mobile wallet player; while 23% of Indians and 27% Indonesians shopped online in the month of January, the numbers for the more developed economies of Saudi Arabia and UAE stood at 41% and 62% respectively.

Given such massive potential user base, mobile wallets are already fast becoming the preferred method of making digital payments, while several other new developments, such as peer-to-peer transactions, are expected to gain consumer traction owing to their disruptive approach. In-store mobile payments have also become more common, with several businesses – big and small – now accepting digital money through NFC-enabled devices.

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The evolution of social media as a medium for businesses to engage with and offer services to the consumer is also something that every payments service provider must keenly pay attention to, especially considering adoption rates within both developed and emerging economies; UAE has 68% of its population on social media networks, while India, at 10%, is rapidly adopting social media as a way of life. As such, providing payments solutions to businesses on social media platforms will unlock a completely new revenue stream for players in the global payments industry.

With mobility-led solutions becoming more and more ingrained in everyday consumer behaviour, we are likely to see m-commerce leapfrogging eCommerce in the near future. As such, industry players will have to make sure that they are aligned with the changing market dynamics. But these new development will also require the formulation of better security standards that will ensure complete payments flexibility without compromising on the security quotient of the consumer.

Newer community-led innovations, such as the emergence of self-regulating blockchains and bitcoins, are also expected to be the new face of the digital currency. The prospect of reducing the operational costs to a bare minimum and optimising their RoI will entice more payments providers to explore these developments in detail, while the end-consumer will also stand to benefit from decreased costs of services. Considering how Bitcoin is today driving an economy which is worth more than $1 billion across the globe despite being incepted just seven years ago, the idea does not seem too farfetched.

However, while the developments may be extremely encouraging, there are certain measures that the global payments players need to implement to ensure continued longevity and success. One of these measures is the creation of a holistic support ecosystem for businesses that not only provides them with payments solutions, but also helps them achieve growth and scale as a partner. It is essential that players in the ecosystem support merchants starting online businesses and need to partner with each other to develop a swifter, more convenient and less cost-intensive infrastructure. This holds particularly true in emerging economies such as India, where a large number of businesses still operate chiefly through an offline channel. The payment players, which reach out to merchants to offer their services, are still dependent upon the timelines dictated by the banks to approve the merchants to go online. This makes the merchants feel frustrated and impatient as they cannot start selling online as per their desired timelines. As seen in some markets, I believe that entrepreneurs in India can sell online, without a website, to their network on various social media channels. Once they develop the traction for their goods and services, then they can afford to invest in websites and be ready to submit more paperwork – related to KYC documentation – to banks to scale their business. This new ecosystem can then help new entrepreneurs to start transacting online in a few days’ time instead of weeks and months of time in some cases.

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Speaking specifically of India, the global payments community is watching the country with eager eyes. With the country rapidly adopting benefits that technology brings, we are seeing a massive scope for the payments industry. With the government also encouraging the digital adoption through its Digital India initiative, we are likely to witness a convergence of Aadhar with local cards such as RuPay as well as digitisation incentives from regulatory bodies that will remove the lack of trust and assist in bringing more consumers online. The country is already moving towards a digital medium, as can be demonstrated by the fact that mobile wallet users conveniently outnumber the credit/debit card users within India.

In short, the outlook for the global payments industry in the long run looks extremely rosy. Technology has opened up a literal Pandora’s Box of opportunities for payments service providers. The onus, now, is on us to make the most of the chances and the tools available to craft a superior, more integrated payments ecosystem that thrives on mutual growth and scale.

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