Two and half years ago when I started working for a financial services multinational, I got an opportunity to learn about payments industry. Most of the discussions were around Cards, Cheques and Third-party transfers (Gross and Net settlements). Fast-forward to today, I see a completely different world. Emerging technologies and smartphones have painted the payments landscape with new colors. Among all the new services, three I consider revolutionary and game changing.
Why carry wallets and cash when we have smart phones? That’s the basic idea behind mobile wallets. Started as online payment service, Mobile wallets are now used to transfer money across the country. In India, major players in mobile wallet services like Paytm and Mobikwik started their journey as online recharge portal and today they offer various payment services. Realizing their potential, Reserve Bank of India, the central bank, regulated the wallet services and gave license to take the payments to next level. Now we can even pay a mom and pop store using mobile wallets. Two major reasons for the success of mobile wallets are convenience and ever-growing smartphone market. Mobile wallets, grooming into payment banks, have a big role to play in emerging countries where most of the population is still unbanked.
P2P payment service enables a user to send money to someone just using their mobile numbers. The key differentiator is that we don’t need any other financial information like account number, IFSC code and so. Though P2P payment services are in early stages, number of startups is already disrupting the market. ICICI and HDFC banks also partnered with M-Pesa and Chillr respectively for P2P payments. OxigenWallet and Instamojo are some notable players in this area. Kenya based M-Pesa is the best example for potential that P2P payments hold in the developing world.
Unified Payments Interface, unique to India, is the next generation platform in the third-party fund transfers. It is one of the key initiatives taken by RBI under the leadership of Rajan. Currently in India, most of the instant fund transfers take place through IMPS (Immediate Payment Service). We have to divulge lot of financial information to send money to someone using IMPS, whereas UPI provides a simple platform for P2P as well as P2M (Peer-to-Merchant) money transfers. Even one can pay for Cash-Delivery using a UPI enabled app. Some of the startups like Trupay, Mypoolin and Splitkart are strong entrants in this space.