Payments growth is currently a rising phenomenon. Looking ahead, global payments revenues will begin to reflect the flip side of Asia’s prominence as a growth driver. The expected macroeconomic growth in India will bring further progress in digital payments next year. So, let us find out some important business trends in digital payment which will drive India in 2017.
- Nonbank digital entrants will transform the customer experience
The demonetization move has led the scene for the entry of diverse nonbank digital players, both technology giants and startups that are presenting increased competition for banks. While start-ups have generally not been a major threat to the banking industry in the past, things will be different due to burgeoning m-commerce and rapidly evolving customer expectations. To maintain their customer relationships and stay relevant, banks will need to respond to these changes with new strategies, capabilities, and operating models.
- Modernization of domestic payments infrastructures
The industry is currently going through a wave of infrastructure modernization that is required to address evolving customer needs. Because infrastructure upgrades are costly at both the system and bank levels, banks need to find ways to build products and services on top of the infrastructure that provide value to end users in order to recover these investments as quickly as possible.
- Growth in Cross-border payments
The entry of nonbank players and new infrastructure demands are not limited to domestic payments: they will also affect cross-border payments. It remains expensive for customers, who also face numerous pain points (for example, lack of transparency and tracking, as well as slow processing times). However, with the rise of nonbank players on the traditional cross-border turf, banks are moving from C2C to B2B cross border payments. Central bankers of South Asian Association for Regional Cooperation (SAARC) countries have underlined the need to design a process to appropriately contextualize Sustainable Development Goals (SDGs) at the regional level in the payment systems arena.
- Retail banking implications for transaction bankers
The digital revolution will extend well beyond consumer payments and retail banking, causing significant development in transaction banking. As customers grow accustomed to faster and more convenient payments on the retail side, they will soon demand similar conveniences and service levels in transaction banking. Having witnessed the impact of nonbanks in consumer banking, transaction bankers would like to respond to the nonbank threat.
- India will see a fintech boom, following in China’s footsteps
China was the first emerging market to experience rapid fintech growth in the last five years. Key enablers for it include a highly-developed e-commerce sector and latent demand for inclusive finance.
India seems to be in a similar position to where China was few years ago. The e-commerce market is the fastest growing in the world (51 percent annual growth), largely due to the competition between Amazon and several local players. There is clearly a large latent demand for financial services and a big push from the central government to increase financial inclusion.
We will likely see successful businesses in the following categories:
- Mobile payment (e.g., widely accepted solution similar to Paytm, Alipay)
- Wealth management (e.g., allowing low-cost access to global stock markets)
- Online consumer and SME lending (e.g., enabling access to credit using innovative risk scoring mechanisms).
Much of the financial inclusion would be about consumer-experience that presents an opportunity for channel convergence by providing consumers value throughout the commerce lifecycle – before, during and after the payment transaction.