2017 Year of Digital Payments


tip-1Some segmentations & light on payments market.

Abstract – I wish you all a very happy New Year 2017. Writing this post from La Reunion. Payments look really easy; which is why innovation is so hard. In last few years we have seen tsunami kind of disruption in payments services, which led eCommerce, wallet services, digital payments, and remittances to just explode. I am here again with with my observations, experience and reading from internet. Please note all my posts are about FinTech, MFS, Banking, Telecom and IT Industry(Some time I also write just anything). I do not include specific organisation or individual names to promote anything. I write only in generic sense on what is going around the world. In India due to 8th November 2016 drastic/revolutionary decision what we will going to see is how ecommerce should be done at a massive scale. Consumers will be willing to pay for convenience and pay for fast delivery also internationally for all global players. Banks have seen the greatest disruption so far in money transfers — sending money from person to person, either domestically or internationally. 

Introduction – Technology is changing at a rapid pace and with it, the consumer experience of buying goods and services. In the coming months, digital payments come to life in India as you board a bus in Bangalore city or a metro in Kochi city. That would accept cashless payments as India’s first smart cards. The card offers integrated services to commuters by offering them cashless bus and train travel. Additionally, it can be used in 1.8 million outlets across the country. New markets, products and services are emerging so quickly it is difficult for consumers and regulators to keep pace. Consumers often have to figure out new technologies for themselves. Key success will be in by offering a full range of merchant solutions for ecommerce as well as retail and mobile order customers. Prides itself will be high-level security, customer support that will put merchants on the road to success.

Main Story – In last few years almost 5 years we have seen tsunami kind of disruption in payments services which led eCommerce, wallet services, digital payments, remittances to just explode. If we review just last 2 years of work and throw the impact of it on this year it would give us very clear projected picture. 2015 year can be written down as year of awareness & noticing payment methods other then cash. In year 2017 we will see (Most likely as per my own calculations and observations), consumers gearing-up for technology, making mind ready to pay little extra for convenience and winning the comfort from their cozy rooms. In 2017 we will find cream out of FinTech tsunami, which will offer affordable payment services. The product mix I will include ecommerce functionality, mail, mobile commerce, high volume offline/online card processing, mobile payments, and retail commerce. BaaS (Banking as a Services) over BaaP (Banking as a Platform) will start showing results. Merchant has all the tools i.e ecommerce, digital wallets, payment services and money transfers will sell successfully online, offline and and grow businesses.

payments-2Year 2016 was the year of financial services with greater technology with too much of Innovations there after adoption and trials. In Indian scenario consumers might face up to the new and different challenges and have the right solution ready for as well. In India due to radical change happened on 8th November 2016 for Indian payment industry, which is also a remarkable period of change for India. Considering the change as extraordinary phase in Indian banking history even though consumers faced some turbulence along the way. Patience & and support shown were even more radical (Positive) example. When even consumers experience service quality disruptions due to the significant increase in footfalls at bank branches across India banks did remarkable job.

I believe it is time to reimagine the payments relationships between banks, retailers, and Fintech. Combative stances and door slamming will only result in lost opportunities for all. To reimagine those relationships, it is helpful to start by understanding the perspectives of each main party. Regulators may step in to address issues but this is often after significant consumer adoption and the market may have already moved on. While the cash payments wave continues unaffected. Mobile/Internet Payments on e/m Commerce Platform is bringing new innovations to the payment industry and changing the way merchants do business. The change in this segment is so huge which cant be absorbed alone by one type of business entity. Payments gateway and solution service companies experimenting with customised solutions rather than giving one-size-fits-all (Like a master one master key for all holes) product solutions to merchants.

dollarToday’s generation of consumers has high expectations when it comes to transparency and flexibility. Modern asset managers act quickly, effectively and transparently. They facilitate an independent yet customised solution and serve as clients’ professional link to all new technologies. This next-generation offer optimises innovation, advancements, cleverness, coolness and smartness. Consumers of the future and we know future is here and its today. Consumers are self-confident, quick, competent, global, tech savvy and demanding. What they want. Communications – consumers want to be able to contact the service provider at any time via Facebook, Twitter, Skype or WhatsApp with expectation of instant responses and resolutions of their queries. Investors with private equity or crowd investing wants simplified access to platforms where funding can be invested/sorted/visible for newly founded companies or projects.

With more and more banks, FinTech and merchants looking to get in on the advantages of instant payments updates, understanding both the value and challenges of real-time processing is now more important. Mobile wallets have had a difficult time attracting a wide user base. Even at the end of 2016, most consumers stick to older payment methods. According to some research data from Google shows in USA, PayPal in-store was used by 18% of respondents, followed by Walmart Pay at 14%. Apple Pay, at 8%, was slightly higher than Android Pay and Samsung Pay. Nearly two-thirds of U.S. cardholders are familiar with at least one form of mobile payment, marking an awareness trend that continues to rise and could ultimately translate to higher adoption and usage rates. But does awareness translates to usage? It might — 74% of consumers who have not used any of the major mobile payment apps say they are interested in doing so in the future, according to new research.

Year 2017 will the year of instant digital payment which does instantaneous validation, acknowledgement, and transmission of transaction data between the point of sale and merchants system as oppose to year 2016 which was “near real time,” which refers to expedited batches that may range from minutes apart to an hour or even more, real time is truly instantaneous processing. Today’s consumers are quickly coming to expect immediate processing of their payments. Technological constraints of mobile devices may impact upon how much information a consumer is provided with during m-commerce transaction. Security and liability – as mobile devices are particularly vulnerable to theft and misuse it is important for consumers to understand what protections are available to them in the case of unauthorise transactions. So how do consumers engage confidently with a market that is constantly changing? How do regulators identify failures when markets emerge, and then change equally as quickly? One way to address these challenges is to identify underlying principles that remain constant, despite technological change.

paymentsPayment systems are pivotal in any economy given their role to facilitate the intermediation process, which is key to achieve financial stability. Payments are a daily and routine activity carried out by people in most parts of the world. These payments cover daily human requirements from transportation, food and communication. Some people transact 2-5 times in a day while some more than 20 times making them heavy users of payment systems. More than a billion people in emerging and developing markets have cellphones but no bank accounts yet they don’t stop their contribution to payment industries, they still do their contribution each day and many low-income people store and transfer money using informal networks, but these have high transaction costs and are prone to theft.

Mobile money is beginning to fill this gap by offering financial services over mobile phones, from simple person-to-person transfers to more complex banking services. To date, there have been more than 100 mobile-money deployments in emerging markets; at least 84 of them originated in the past three years. In markets with real-time payments infrastructures, banks have managed to fight back and actually have taken the lead in P2P payments. For example, Swedish banks have developed an app called Swish, and in the UK, Barclays is leading with its popular PingIt app. Even in markets yet to move to real-time payments, such as the US, banks are trying to recapture their position in money transfers. Recent examples of activity include Early Warning acquiring clearXchange, BBVA partnering with Dwolla, and TD Bank exploring opportunities with Ripple.

carries_no_cash_two_tone_coffee_mug-raf354f7001b24e00906b05d9722565e2_x7j1m_8byvr_324Conclusion – Country like South Africa, which has, if not highest in the world but many services where Cash is not allowed to come in as those are strictly “No-Cash” services. An innovative leap is currently taking place under the keywords of social media and FinTech. Many banking services are being redefined. This includes technologies related to e-commerce, mobile payments, crowdlending, crowdinvesting and asset management. The result will be a future in which many services are only offered electronically. Countless finance apps exist which generate added value for clients. These can be used to query master data, receive business news, create portfolios, enter payments, draw up charts, convert currencies, etc. These key challenges that banks and merchants need to know and have solutions ready when embarking on real-time payment processing.

How does the system handle minor or intermittent communication failures? Do transactions queue and how does it work? Is the transaction secure during the entire process and how is it secured? What if only part of the real-time process works for a particular transaction? What is the notification process when a payment is not received? Mobile commerce would remain as opportunities and challenges for consumers, businesses and regulators in 2017 though.

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