Even God Pays Cash Here

Abstract – This article is focused on 2 recent changes in the mobile payments industry. First being an attempt to derive positive outcome from the recent revolutionary steps taken by the Reserve Bank of India and secondly how these will put pressure, impact or attract eagle eyes from its neighbours who also follow the same thought process. Times have changed and with change comes opportunity, over the past few years, the face of financial payments in most developing countries has taken a radical change and now its India’s turn to transform the payment space through initiatives where tickets are issued to non-bankers to start a journey by diversifying from a bank model to a mobile network operator (MNO) or Mobile Financial Services Provider (MFS) dominated model.

This change will bring financial inclusion to most marginalised citizens and will greatly bring efficiencies to the payment industry and as a result, banks will have great difficulty competing with MNOs & MFS providers. This is risky as well for a market like India where Cash is the KING and people proudly put stickers at their payment counters reading “Even God Pays Cash here”. The financial situation is dire as we were informed of yet another bank going bust a few days ago. Investments can go down as well as up and nobody knows of the date. But, with governments realising that digital currencies are the currency of the future and exchanges springing up across the world, it would be a brave man who would bet on the demise of block-chain backed digital currencies. The Ministry of Innovation is now in the play mode and is ready to roll.

Introduction – Accessibility is a critical success factor for any service. Informal institutions providing financial services to members of the community rely on easy accessibility to banking services whereas banks have traditionally relied on a wide branch network of fully branded brick and mortar banking halls with all the necessary staffing and security systems. India has got lots of exiting times ahead where it will see transformations of lives, businesses and many more along this line. With floods of options led by RBI for private players in India and soon international players like Apple Pay, Android Pay, Samsung Pay, soon to be challenged by Microsoft and others. The confusion is such that digital currencies just might be the way that retailers, large and small, will have to go with or without choice.

If you are a big data enthusiast in the payments industry or a financial technologist ramping up (or scratching your head) or even an industry reviewer with business analytics and strategy goals, it is important to spend some serious time deeply understanding the architecture of key systems to appreciate this evolution. Understanding the architectural components and subtleties would also help you choose and apply the appropriate technology for your use case or payment methods or acceptance methods. In my odyssey over the past few years, some real life experience in payments and literature of innovations around this area has helped me become a better educated MFS professional. My goal here is not to share only literature or my own assumptions with conclusion (Which would be very unfair and with absence of logic) but consequently also use the opportunity to put some sanity into the labyrinth of open source systems.

Main Story – When was the last time the Indian payment market under banking or non banking domain did something for the first time; I guess I cant remember the answer. Now after this wonderful step from the RBI of issuing payment bank licenses to non banking companies (yes many more coming in soon on the same line) and Indian finance ministry mulls 1% Income Tax rebate for credit/debit card payments. India is experiencing Disruption in Financial Services or one can say it is going to experience the Indian Independence movement of year 1857, which ever is the case Indian payment market is surely going to see big revolution. RBI did a splendid job by granting 11 licenses for payments banks. The payment bank is a great piece of innovation from the RBI and is an excellent example of a step taken into reality and future, accepting the change itself is a commendable job.

The Indian payment market is cash dominated where people just love cash even many love to sleep over cash (some pump cash in their bed mattresses or cushions) in some cases. Change is coming and without saying change also bring many opportunities & challenges. As on date, the Indian market has a big menu or table full of so many exciting items like new licences, smart phones, Aadhar identification, IMPS, e-sign, payment banks etc. All the changes coming in require drastic changes in regulations, technologies, design, market trends and biggest one is subscriber behaviour or mindset. Do you remember what WhatsApp did in 2009? Brace up for the same now. This will turn India into a Cashless Society; or more of a digital cash society. On the impact side one can anticipate positive outcomes.

• Expand financial sector reach by leveraging on a Mobile medium.
• Domestic remittances and inter payment bank transfers will reduce time to send and receive funds and payments to almost zero.
• Ease of use for financial services via various interfaces like IVR, USSD, SMS and Smart Apps.
• Expand set of services to larger sector of society.
• Solution Providers (Service Provider) for Prompt payment of bills enabling better cash flow
• Acquire large number of customers for their solution or services.

As they say, there will always be southward runners when you are walking towards the North. The more you grow, the more they run Southwards; the more they try to go South, the more you will be pushed off towards the North. In reality, most Innovation haters are stuck in a poisonous mental prison of jealousy and self-doubt that blinds them to their own potential (Nothing against anyone have read something on some blogs I guess should have not done that before completing this write up. Microsoft Payments, also known as MS Pay is going to join Apple, Android, Samsung in the payment war. Windows 10 for phones supports Host Card Emulation, licensing makes it official. And now if within same para we can correlate first and later part to make context out of the same, pointing to new wave of payment which will bring excellent change and good things to life and people’s job.

The issuance of 11 Payment banking licenses is evidence of Indian Payment Market getting the 1st major step towards freedom from cash. Aditya Birla Nuvo Ltd, Airtel M Commerce Services Ltd (Part of India’s largest MNO, Bharti Airtel Ltd), Cholamandalam Distribution Services Ltd; Department of Posts, FINO PayTech Ltd, National Securities Depository Ltd (NSDL), Reliance Industries Ltd (RIL), Tech Mahindra Ltd, and Vodafone m-pesa Ltd ( Part of Vodafone India Ltd). Since the RBI does not want corporates in banking, they are going for the next big thing that’s available – payment bank licences. The reasons why payment banking will revolutionise money movement are many. Consider the areas they will touch, and how their mere presence will impact everyone.

The new category of banks, which will be proven as “To be Disruptive”, will provide basic savings, deposit, payment and remittance services to people without access to the formal banking system. Finally, India will also see financial inclusion in the real sense. The savings groups will operate by using an existing/upcoming mobile wallet, developed for basic/smart phones. It will bring ice cream eating simple processes like; Use of existing/upcoming mobile wallet, Automatic book-keeping / message service, Group savings will be another disruptive move which will be very effective and safe in the name of Chit-Fund (Kind of Savings Groups). The payments banks will target financially excluded customers like people in diaspora, low-income households and informal small scale businesses.

Payment banks for now are restricted from the business of lending, so they will be shielded from the risks that conventional banks are exposed to. In the long run would like to see services coming in like micro credit, micro insurance, funeral cover, Accidental insurance etc. As over the period of time there is a big opportunity to build credit rating system for ratings and learning behaviour which will then enable extra benefits and services to attract more and more subscriber on to this. While mobile payment announcements from various smartphone makers are growing in frequency, still too much unknown & doubtful thoughts that such services will drive much interest in buying the smartphones that support it. Time has now come for banks and other entities with an interest in financial service provision, to step up as one team, exploit technology and leverage on existing MNO infrastructure to acquire customers, enrich use cases, lower costs and increase revenues.

Conclusion – If the Earth starts rotating 30 times faster that does not mean it will start bringing you the salaries 30 times a month or every day so in a nutshell, such changes are good and always bring benefits for society but we need to be patient enough before we start milking the cow. What are the implications of Mobile based Payments and Solutions? Is it going to change the world, be a significant “win”, be a nice hack. Proximity based, Mobile App, SMS or USSD, Cloud or hosted mobile payments can support globally and will give financial institutions and partner’s greater choice in offering consumers secure ways to pay with smartphones.

1) Which route to go as crux of this discussion?

2) What are your views on same?

3) What are the implications of this radical change?

4) Is it going to change the Indian world (very likely), be a significant “win”, be a nice hack, or simply serve as a road sign indicating that this path is “UNKNOWN”.Which system is useful and needed for the business considering the market you operate and synchronised with your strategies and goals. Your views and comments are welcome… 

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