Why my 17 yr. old son thinks cashless payments will be bad for him

My son, who is applying for university: Mum, you speak of digital and cashless payments, but I think cash is actually very useful. I’ll be away from home, and I want to make sure I do not overspend. I can load up my wallet with a fixed amount per week or month, and make sure I spend only within that.

Cash is tangible. I can go count it any time and I will have better control over my spend. If I’m making a mobile payment, it becomes too easy to pay. If the payment is backed by a credit card, won’t it make me less conscious of the money I’m spending?

How can we ensure digital payments not only make it easier to pay, but also help my son and his generation manage their finances?

Challenges SMEs in Singapore face in going cashless

With $2 billion as costs incurred by Singapore to manage its cash and cheque-based payments, cashless is the way to go. However interoperability and merchant fees are among key areas that need to be addressed for Singapore's cashless drive.

Even DBS' PayLah though free, won't work for merchants in its current form as it is primarily a P2P payment mode where transactions go through personal account rather than corporate account.

Check this article on the challenges SMEs in Singapore face in going cashless: http://www.straitstimes.com/business/banking/challenges-smes-face-in-going-cashless

Singapore keen to catch up with China on digital payments

Just last week, I had an interesting conversation over dinner with a couple of my Lean In Singapore Women In Tech team members on the developments made in payments in the respective countries we hail from (one is from Australia, another from China, I'm from India).

We spoke of the massive leaps made in developing markets such as China, India and parts of Africa that have left developed countries far behind in how payments get done. My friend from China spoke about the exact thing that Singapore's PM Lee Hsien Loong stated in his National Day Rally speech on Sunday - that Chinese tourists would consider Singapore backward for still doing things the old way!

China has seen an astounding spread with cashless payments. To the extent that China has now reached a stage where the government has to remind merchants and payment providers that cash is still a valid payment option! 

#mobilepayment #cashlesspayment #China #India #Singapore #payments #Alipay

Cashless India: Seeing the Vision for Financial Inclusion Come True – Part 3 (Article published on Let's Talk Payments)

Role of infrastructure in Financial Inclusion & addressing barriers to adoption of mobile payments  

This is part three of a series covering disruptive banking, regulatory, technology-led and payments initiatives being taken by the government, regulatory, enterprises and private firms to achieve financial inclusion and a cashless (or a less-cash India) vision. In previous posts, we have covered

• Part 1 - The India Stack and UPI enabled technology platform built on top of the "JAM" trio of Jan Dhan bank account, Aadhaar and Mobile.
• Part 2 - Banking initiatives aimed at increased customer reach via new payment banks and an improved business correspondent network. And the role of mobile payments as an enabler of financial inclusion
• In this post, let’s take a look at the mobile payments landscape in India which is seeing a lot of action but also adoption barriers that have limited its growth. We will then continue to understand the role of the infrastructure now emerging in India in overcoming the adoption barriers, and how these will position India favourably to achieve financial inclusion.

An observation recently at a bus stop highlighted the crucial importance of a country’s infrastructure. I was at the bus-stop in Singapore a few days ago. When my bus arrived, the bus driver (there are no bus conductors here) stepped down from the exit door, and pulled out a fold-down ramp that rested just rightly so on the footpath. He then gently pushed a wheel-chaired person, who was commuting solo, out onto the footpath from where that person proceeded on his way. He then wheeled in another solo wheel-chaired commuter, folded in the ramp, and only after he made sure the commuter was comfortable, did he proceed to take the driver's seat and open the entrance door for us.

Later, he helped the second wheelchaired commuter alight at the same bus-stop as mine. As I watched him maneuver himself easily over the seamless sections over footpaths and road, it brought to mind how possible this whole activity had been for both those wheelchaired commuters - who could travel independently, and travel much cheaper (on the public bus). But for that to be possible, a whole lot of “plumbing” - a combination of infrastructure and training - has been put in place that enables disabled commuters to use public transport. The driver knew exactly what protocol to follow for wheelchaired commuters. All buses would be equipped with the fold-down ramps. And all footpaths across Singapore would be aligned to allow for leveled and gap-free boarding and alighting. And of course, to ensure no obstruction for wheelchairs, footpaths would be free from hawkers etc.

The reason I recount this incidence is because when we look at financial inclusion, it is not much different from inclusion in transport such as is actively encouraged in countries such as Singapore. The entire objective of inclusion in transport is to ensure persons with disabilities - wheelchaired, hearing or visually impaired etc. - all have access to transportation on an equal basis with others.

The infrastructure needs to be put in place keeping in mind, not only the abled population for whom the obstacles and barriers are not even noticeable, but to ensure that the disabled can commute as effortlessly as they can.

So while an elevator at a train station may be a luxury for an otherwise abled person, it is a necessity for a disabled person to be able to commute.

Similarly, a robust plumbing - infrastructure and training - is crucial to address not only the already financially included, but more crucially, address the financially excluded sections of population. These constitute large chunks of the population at the bottom of the pyramid - Who besides not using credit or debit cards or electronic transfers for making payments, even more importantly, cannot avail of fair, cheaper or transparent financing and payment services. Whose salaries or daily wages do not come into their accounts in a timely or seamless manner. Who suffer from money pilferage and exploitation due to which the intended money does not reach the intended beneficiaries.

Mobile payments in India - crowded landscape, limited growth

We saw in the previous post, the integral role of mobile-based payments in bringing the financially excluded into the formal financial and banking fold. Demonetization has put the limelight on and may have catalyzed digital and mobile based payments. However in India, only 5% of personal consumption expenditure currently happens digitally.

In order for digital payments to reach critical mass and for financial inclusion to reach the bottom of the pyramid, it is important to address disparate consumer segments, each of which is characterized by different pain points and adoption barriers. As well as address pain points on the digital payment providers that service the industry.

There are some significant barriers to adoption of mobile payments.

Digital Payments Providers: Variety of solutions with lack of interoperability

The mobile payments landscape in India is already crowded. However, despite the large number and variety of solutions introduced by multiple providers, adoption has remained low. This is both a positive and a limiting factor for the growth. Let’s see why.

Take a look at the range of mobile payment solutions in India launched by various players:

• Banks: E.g. SBI Buddy, ICICI Pockets, HDFC PayZapp, AXIS Lime, IDFC Bank Ziggit etc.
• Mobile carriers (aka Telcos): e.g. Airtel Money, Vodafone M-Pesa, Reliance Jio Money, Tata Teleservices TruPay, etc.
• Pre payment Instrument (PPI) providers: These include Mobile wallets which get funded by credit / debit card or through net banking, e.g. Paytm, Mobikwik, mRupee, FTCash, Citrus Pay; Pre-Paid Card solutions e.g. Oxigen, Itzcash, Suvidhaa; Retailer-led solutions such as Flipkart PhonePe or Snapdeal’s FreeCharge, or Transport company-led solutions such as Ola Money.
• Credit card companies: e.g. Visa payWave, Citibank and Mastercard’s Citi MasterPass
• Regulators: interestingly, we have recently also seen solutions launched by regulatory bodies such as the Reserve Bank through its National Payments Corporation of India (NPCI) with Bharat Interface for Money (BHIM) . And the Unique Identification Authority of India (UIDAI) with Aadhaar Pay to enable users who do not have mobile phones to pay merchants using their Aadhaar card and bank account.

The multitude of solutions available in the market have had many users confused with which solution to use and for what purpose. With each solution having its separate closed user group or “island”, tagged to a different platform, users cannot use one single solution for a multitude of payment purposes. Therefore the need is for an infrastructure that provides an underlying “plumbing” or interoperability whereby islands start getting connected to each other. That will enable a user on one solution’s platform to transact as seamlessly as possible with a user on another platform. And the funding the payment transaction takes place seamlessly from their chosen bank account in any bank, and can be transferred to the beneficiary into an account in any bank.

Despite its benefits to users, the plumbing for interoperability rarely happens on its own - the absence of a regulatory framework, competition between various stakeholders and the lack of consensus on commercials and technical models all pose to be challenges in laying out the necessary plumbing. Therefore, it is notable that NPCI and India Stack have developed the Unified Payment Interface (UPI) platform as an interoperable infrastructure that allows for solutions from multiple providers to be built using the platform’s Application Programming Interface (API) stack. This will allow enterprises, entrepreneurs and government to build their solutions to publish and subscribe to each other’s API - similar to a “handshake” between two systems, to establish communication and interfacing with each other.

The lack of interoperability in mobile payments is a challenge which many other countries are seeking to resolve, including countries such as Kenya which has seen the world’s most successful adoption of mobile payments, but has seen much lesser progress in financial inclusion (we shall cover this in further detail in the next post).

Digital Payments Consumers: Low user engagement

Users of mobile payments constitute all entities who make or receive payments via the mobile phone - Individual persons, merchants, governments, business enterprises are all mobile payment users either as payers or payees depending on which end of the payment transaction the are at.

Each payment scenario represents unique customer segments, and mobile payments have seen low adoption because

1. Users have been inherently slow to change their payment habits. Users either find that existing modes such as cards or cash are already convenient and / or do not perceive the added benefits of using mobile payments as strong enough to consider changing payment habits.
2. Concern over security is another reason for low adoption.
3. Not all users are equipped with smartphones - which has highlighted the gap for digital solutions that work with feature (non smart) phones, and also for solutions that can work for users with no mobile phones at all.

In order for India to go truly digital, mobile and digital needs to be part of users’ routine payment transactions.

For this, mobile payment players need to particularly note that while they will be competing with each other in this space, their biggest competition is from cash or cards. Therefore mobile payment solutions need to be as frictionless as possible in terms of security, convenience, ease of use and cost of transacting.

As we covered previously, bridging the “last mile” in financial inclusion is no mean feat as despite more than five decades of work done, between 40%–50% of Indian households today still do not have a bank account or have little or no access to financial services. Hence, that “last mile” is actually a massive distance we need to cover if the entire country including the bottom of the pyramid needs to reap the benefits of financial inclusion. This has necessitated exploring further disruptive approaches to banking.

In the next post, let’s look at what are the digital payment scenarios now possible, and how the new infrastructural plumbing can bring in stronger adoption of mobile payments, and position India strongly to achieve low-cost, ‘last mile’ delivery channels for financial inclusion.

This article was also published on Let's Talk Payments

Cashless India - Seeing the vision for financial inclusion come true - Part 1 (Article published on Let's Talk Payments)

The move toward a cashless India is important for several reasons. What are some of the initiatives taking place in the background that will make cashless a reality for India?

“Cashless” India has become quite the buzzword over the past fortnight since the demonetization move was announced. The move toward a cashless India is important for several reasons. India is one of the most cash-intensive economies in the world, and the heavy dependence on cash has several pitfalls for the Indian economy. The much talked-about pitfall has been the existence and growth of a “black” economy, where large chunks of money in the Indian economy are neither accounted for nor taxed. A heavy cash dependence has also meant that despite large budgetary sanctions through many decades of planning and five-year plans, the intended money has not reached the intended beneficiaries. Cash dependence also costs the Reserve Bank of India and commercial banks a huge expense annually just in currency operational costs.

Making India cashless is not an easy objective to meet. It has been almost a decade since I have been tracking the mobile payments space, and occasionally blogging and presenting on new developments in this space. In September 2014 I wrote of an imagined world where we can catch the sight of payments made via the mobile phone to be as commonplace as the cash (or card) used today to make payments. I imagined a world where riding on the promise of speed, convenience and efficiency, large sections of the population would:

• With a few simple taps on the mobile screen, pay utility bills or their children's school fees, make cash gifts...even settle IOUs between friends or split restaurant bills.  

• By just one wave of the mobile, get in and out of public buses and trains.

• By a swipe of the mobile, pay for groceries at the supermarket, or the hairdresser at the neighbourhood salon, or for the daily coffee dose at their favourite cafe.

But my imagination met many roadblocks as when and how this would reach critical mass in India was unclear. While the mobile phone had become an omnipresent feature for most of the country, having it replace cash looked not only distant but also difficult as there was little or no impetus for payers (consumers) to move away from cash or to adopt mobile payments. Nor was there a reason for for the payees (merchants) who face cost and technology barriers to move away from accepting cash.

In November of 2016, as I look at this space again, my attention is drawn to some key initiatives taking place in India that point to us being on the cusp of making mobile payments a greater reality. These initiatives can take us toward a cashless India. And I think the recent demonetization move has made many Indians - on the payer and payee side - rethink their dependence on cash. And despite the downside of demonetization, it can act as a huge catalyst to bring about change.

To set the context for cashless India, I’d like to first highlight the evolution of India Stack. India Stack is a fascinating concept conceived around 2012 when the Central government realised that it cannot deliver citizen services on its own efficiently. What it strives to be in terms of objectives and scale is unseen in India and perhaps anywhere in the world. With India Stack, we will have the largest Application Programming Interface (API) enabled technology platform that allows massive and transparent data exchange and stronger collaboration between the government, private companies, entrepreneurs, and the general public.   

India Stack is built on four layers (and each layer has a specific underlying technology that makes it possible):

1. Presence-less layer: where a universal biometric digital identity allows people to participate in any service from anywhere in the country (Aadhaar authentication and eKYC)
2. Paper-less layer: where digital records move with an individual’s digital identity eliminating paper records (eSign and Digilocker)
3. Cashless layer: where a single interface to all the country’s bank accounts and wallets democratises payments (Unified Payments Interface)
4. Consent layer: which allows data to move freely and securely to democratise the market for data (consent architecture)

The fundamental layer underneath all of these layers is “JAM”, an acronym coined for the trio of elements that India Stack will use. JAM stands for Jan Dhan Yojna (envisages universal access to banking facilities with at least one basic banking account for every household in India), Aadhaar (Unique Identification for all residents of India) and Mobile smartphones, all of which have seen rapid adoption in India.

Let’s now focus on the Cashless layer.

The Unified Payments Interface (UPI) forms the core of the cashless layer of India Stack. In April 2016, the National Payments Corporation of India (NPCI), the umbrella organisation for all retail payments systems in India launched UPI as the next generation online and mobile payments solution. UPI is an advanced version of IMPS (Immediate  Payment Service) that was launched in 2010 offering an instant, 24X7 tool to transfer money instantly within banks across India through mobile, internet and ATM.

UPI today powers multiple bank accounts into a single mobile application of any participating bank. Mobile payments is at the core of UPI and with the massive adoption of mobile phones in India across all strata of society, this makes it most viable to achieve critical mass and succeed. UPI supports both Push (Pay request to send money using virtual address) and Pull (Collect request) financial transactions. Built on top of UPI and equipped with multiple Indian language interfaces, many new products and services have been and will be introduced in India. Here’s a peek into some of the products and services:

APBS and AEPS

APBS (Aadhaar Payments Bridge System) is a system that facilitates transfer of all welfare scheme payments to beneficiary residents' Aadhaar Enabled Bank Account (AEBA). APBS will function as a push transaction. AEPS (Aadhaar Enabled Payment System) is a system that leverages Aadhaar online authentication and enables AEBAs to be operated in anytime-anywhere banking mode by the marginalized and financially excluded segments of society through microATMs. AEPS will function as a pull transaction. The success of AEPS rests on the availability of large number of Micro ATM’s and ATM’s equipped with biometric authentication facilities. As the banking and ATM network is limited in India, newer forms of banks and Business Correspondents (BCs) are expected to step in to service the population (more on this in the next blogpost).

APBS and AEPS will play a huge role in disbursements of government entitlements like NREGA, Handicapped, Old Age Pension, Student scholarship, etc. of any central or state government bodies. This is a big step toward reducing corruption and ensuring intended money reaches the intended beneficiary.

RuPay

This is a new card payment system launched by the National Payments Corporation of India (NPCI), offering a domestic, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments. As it is an cheaper alternative to the more expensive Mastercard and Visa card networks, it is expected to be a hit with merchants, especially the smaller and medium-sized merchants.

*99#

Banking customers who do not have a smartphone or are challenged with usage of smartphone can avail this service by dialing *99# on their mobile phone and transact through an interactive menu displayed on the mobile screen.

Bharat Bill Payment System

BBPS (Bharat Bill Payment System) will function as a tiered structure for operating the bill payment system in the country under a single brand. National Payments Corporation of India (NPCI) will function as the authorized body, which will be responsible for setting business standards, rules and procedures for technical and business requirements for all the participants.

These are just some of the products and services coming from the India Stack that will propel India toward a less cash dependent and a more transparent economy. Many of them have already been rolled out, and are being phased out. As the technology platform provided by India Stack is an open-data initiative and is supported by an open API policy, it paves the way for many enterprises, entrepreneurs and government bodies to collaborate for building cashless services on top of Aadhaar, Jan Dhan and Mobile. This is a huge development for India and is set to change the way the country conducts its financial transactions. More critically, it will change way India’s yet untapped bottom of the pyramid will conduct its financial transactions as the adoption barriers reduce. We all are and will be consumers of this cashless layer - be it as merchants, business owners, beneficiaries of welfare schemes

While the technology platform provides a vast canvas, there are other components too that are critical to make mobile payments and cashless India reach critical mass and to accelerate financial inclusion. Let’s take a look at some of the revolutionary changes taking place in the banking system in India in the next blogpost. 

This article was also published on Let's Talk Payments

https://letstalkpayments.com/cashless-india-seeing-the-vision-for-financial-inclusion-come-true-part-1/