Year 2017 was the turning point for digital payments in India; a post-demonetisation era that made payment systems gain center stage with accelerated focus on technology, adoption and expansion. While the governing establishment seems keener on a less-cash society and is encouraging a digitally prudent India, cash too has returned as the leading mode of transactions. This situation unlocks glorious opportunities for companies, in the banking sector and beyond who can now cater to a much larger audience and offer parallel services depending on the consumer’s comfort of cash or digital.
India already has the second highest fintech adoption rate among digitally active consumers at 52 percent, only second to China at 69 percent, which is the global highest. Usage is significantly high in large cities with a 66 percent adoption rate followed by 51 percent in small and medium cities, while rural India lags at 33 percent. These figures would swell as digitisation gathers more steam and success.
As we move into 2018, I envisage these areas would earn far greater significance, while some technologies we will need to capitalize on sooner rather than later:
Bank-fintech collaboration: Fintech and Banking sector have already begun to collaborate as partners to upgrade trust, transparency and transactional efficiency. Our country’s current reliance on transactions via cash and cheque stand at 95 percent plus.
For automating back-end and front-end applications through various high technology products and other self-service facilities, many tech and banking companies are coming together and leveraging the expertise and resources of each other to reach their common goal of enhanced consumer service. This illustrates the spirit and dimension of a bank-fintech collaboration which will eventually benefit consumers especially in Tier 2 and 3 towns.
Blockchain network: The government’s think–tank, NITI Aayog, is working on building the country’s largest blockchain network – IndiaChain – with a view to reduce frauds, speed up enforcement of contracts, increase transparency of transactions, etc. Touted to be the future infrastructure for payments and transactions, blockchain may move on from a buzzword to a practical platform this year, even if it may be just in its experimental phase.
Data and transactional security: With data growing and accumulating largesse, the security will be the biggest point of concern. Banks and financial institutions will be required to invest to employ even better preventive strategies in areas of encryption, OTPs, biometric authentication and Aadhar linkage to safeguard the growth in digital transactions. While last year witnessed emphasis on technological boost, this year will be about enhancing security measures and encouraging investments in superior fraud management technologies to help the end-user transact with more confidence.
Phygital banking: With rural and semi-urban spaces still far away from the digital revolution, it is imperative for banks to bring digital interfaces inside the confines of a physical bank branch, to provide basic services but in an automated environment. For instance, Canara Bank with its CANDI has shown the way for many to replicate.
Smart travel solutions: With roads and infrastructural projects like Metros, Monorails and National Highway network, there will be a greater development in seamless transit experience and related payments. From IRCTC to Kochi Metro, we are witnessing adoption of new technologies like AFC, ETC, open loop cards and QR Code ticketing in these mass commuting platforms. RFID based smart fueling & automation solutions for faster payments at petroleum outlets will be a trend to watch out for.
Facilitating MSME’s to access finance: The economic growth of India can be considerably attributed to the MSME’s segment, besides the bigger players. Fintech companies have begun to reimagine their business models and can be seen entering loan lending space to empower MSME’s. While earlier only banks were the access points for loans, fintech companies are now enabling SMES to access finance more easily. In 2018, one may expect to see a huge evolution is this space.
In an informed economy, the smart will survive and the smarter will thrive. While we encourage digital interface to take us into the future, current cash platforms will continue to modernise and get automated to create a robust ecosystem, ultimately making banking a more secured and effortless experience.
(The author is Chairman & Managing Director, AGS Transact Technologies)
Updated Date: Jan 15, 2018 17:10 PM