Building a Payment system in India
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How a collaborative approach towards Financial inclusion and Payment system can drive the less cash agenda for India
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Building a Payment system in India
- 1. Mumbai Building a payments ecosystem in India April 21, 2016 A collaborative approach
- 2. Indian landscape Total Population 1.25 bn No. of Bank Accounts: 702 mn No. of Debit Cards: 394 mn No. of Credit Cards 22 mn Source: RBI Payment system indicator Low Penetration of banking and traditional electronic transaction services
- 3. Indian Landscape All nos. in Mn Source: TRAI PR January 2016 Mobile telecom penetration is deeper then banking
- 4. Typical payment requirements Domestic remittanceDomestic remittance Salaries Interest/Dividends Loans Refunds etc. Salaries Interest/Dividends Loans Refunds etc. Tax refunds Social benefits Salaries Tax refunds Social benefits Salaries Investments Bill payments Fees Over the counter Pymt Investments Bill payments Fees Over the counter Pymt Commercial payments Invoicing Supply chain payments Commercial payments Invoicing Supply chain payments Tax refunds Project and service payments Tax refunds Project and service payments Taxes Fines Taxes Fines Taxes Statutory fees Earnest money etc. Taxes Statutory fees Earnest money etc. Inter govt. flows Inter govt. flows FRO M TO Consumers Business Govt. Consumers Business Govt.
- 5. Three dimensions of Financial inclusion Source: G2o Global Partnership for Financial Inclusion
- 6. A Collaborative Digital Finance Framework 6 Source: ASSOCHAM PWC India: Logging into digital banking A Collaborative Digital Framework
- 7. Collaborative Models Banks and Telecom collaboration Government led Model - JAM Unified Payment Interface (UPI) Bharat Bill Payment System (BBPS)
- 8. Bank and Telco Collaboration Amoun t Service enables opening of no frills bank accounts over mobile phone and offer basic transaction services like • Cash in/ Cash out • Remittance • Recharges • Payments • Direct Benefit transfers • Access Channels: Distribution network of telecom operators • Migrated workers [ Working in industry such as construction, textile ,diamond etc.] Payment System/s Target Customer Segment Key Players • IMPS • NEFT • AEPS [Pilot] Brief Description
- 9. Government led Model- JAM
- 10. Unified Payment Interface Unified Payment Interface- UPI
- 11. Bharat Bill Payment System 11 BBPS is proposed to be a pan India system for running the bill payment system in the country Entire system running under one brand name to ensure customer confidence BBPS aims to provide Convenience of anywhere anytime bill payments An interoperable bill payment engine for millions of customers in the country Replace the segmented bill payment taking place in Silos at present The operating units will link up billers and collection agents and provide interoperability that is lacking today
- 12. Thank You
Notes de l'éditeur
- Good morning everyone, I would like to thank the organizers of Cards and payments Asia to offer me this opportunity to talk about the evolution of payment landscape in India. India, is a land of contradictions, on one hand we are growing at a decent clip and making our presence felt on the world stage while on the other hand we are tackling the issues typical to a developing nation. One of our major challenges is to bring all of our citizens under the net of formal financial services so they can participate in the growth and enjoy the fruits of success of the nation, today I will discuss how we are moving towards the objective of Financial inclusion by building business models in collaboration with various entities Financial and non- Financial to bring the Financial and transaction services to the last mile.
- Lets start with building a background on how India Stands today in terms of penetration of banking services As you can see the (explain the diagram) only about 60% of the total population has bank accounts and penetration of debit and credit card is even less.
- But in the same country mobile penetration is close to 80% (1000.4 mn), Smartphones 651 mn, Mobile internet 402 mn. India has already leap frogged the digital evolution as many first time internet users are accessing Internet over a mobile device instead of a desktop
- These are the typical payments flows that happen in any society And India because of low banking and electronic payment penetration presents a USD 2 trn market for digital payments, So from the last 3 slides we can safetly conclude that to To drive a digital transactions agenda in India Development of a digital payment system and Financial inclusion agenda have to go hand in hand and according to a recent survey by accenture, a succesful deployment of inclusion strategy in India is a 22. 4 bn dollar opportunity
- Any Financial inclusion initiative has three important dimensions Availability Acceptance Usage And the same dimensions can be applied to a successful payment ecosystem also Availability: The payment system should be available across spectrum, should be interoperable, and usable over multiple channels Acceptance: it should have a wide acceptance ecosystem of merchant outlets, that would increase the acceptability, and for that too happen it should be cost effective Usage: For increased usage the payment system should be available for a wider audience over multiple access channels across price points and convinience
- Hence In order to drive the payments and Financial inclusion agenda effectively in a country like India we need to create a collaborative digital finance framework that comprises of traditional banking infrastructure, regulators and government entities and the new players in the ecosystem like telecom operators, fintech companies wallets etc. this framework will enable India to achieve three objectives Financial Inclusion Increased share of digital transactions A less cash society This framework will help to plug some important gaps in the current systems and may also give rise to new sectors and services which are as yet un identifed
- Indian Financial system has started taking steps towards creating the collaborative infrastructure that is required to drive inclusion and electronic transaction objective and the best part is government and regulatory bodies under the aegis of Digital India Strategy are actively working towards providing an enabling environment in regulatory and infrastructure terms to achieve these objectives Payment banks, relaxed norms for PPI and BC Going forward we will explore some of the initiatives taken in the country
- Bank and telco collaborative models are the earliest examples of financial inclusion using digital technology and have been fairly succesful in African countries, In India, ICICI bank’s collaboration with Vodafone to launch M-PESA services was first such initiative in India. Under this collaboration we offer a variety of services where we bring in our banking experties and Vodafone brings its distribution and telecom network to provide inclusive banking and other transaction services to the masses, apart from basic services we have also tied up with various government bodies
- JAM is the vision of current Indian government where two major policy initiatives of Govt. of India, Jan dhan accounts (low cost accounts for un banked) and Aadhar card (social security no. equivalent) will be combined with mobile phone penetration of India to provide basic banking services and direct benefit transfers to the citizens, bodies like NPCI have created infrastructure like AEPS to enable fund transfers between bank account using the linked aadhar number, the LPG subsidies and some other social benefits provided by government are now being directly credited into citizen’s account without any intervention. Hence bringing in more transperancy in the system.
- Recently launched UPI (Unified Payment Interface) is the most ambitious payments project launched in the country which targets to bring electronic payment to every bank account and mobile phone in the country. Explain the diagram and UPI