On digital india

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Digital India
Growth is Good

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From Barter To
Cashless

History of Money
Source: Telegraph/The History Of Money, Investopedia/ Roots Of Money
Barter Coins Paper
Money/Cheque
Electronic
Payments
Digital
Payments

Glossary
A Cashless Economy is one
in which all the transactions are
done using cards or digital
means with the minimal
circulation of physical currency.
Demonetization is the act of
taking away a currency unit of
its status as legal tender. It is
mainly used to combat inflation,
to combat corruption, and to
discourage a cash system.
A Digital Wallet refers to an
electronic device that allows an
individual to make electronic
transactions without using debit
or credit cards.
Cashless Economy Demonetization Digital Wallet
Digital payment refers to a
system that facilitates the
acceptance of electronic
payment for online
transactions. Common digital
payments instruments include
debit/credit cards, digital
wallets, NEFT, wire transfers,
and others.
(UPI) Unified Payments
Interface is a payment system
that allows money transfer
between any two bank
accounts by using a
smartphone without the hassle
of typing credit card details,
IFSC code, or net
banking/wallet passwords.
USSD (Unstructured
Supplementary Service Data)
helps with mobile financial services
(MFS) with communication
between customers and their
mobile payments platform. It is
currently the best technology
available to provide MFS to low-
income individuals.
Digital Payment UPI USSD
Source: Wikipedia

First Off, Digital
Payments Globally

Evolution Of Consumer Digital Payments Globally
Source: BCG
Source: The Economic Times, 2016 Market Report by Fortumo
Digital Payments Are Growing Rapidly With The Changing Needs Of Consumers

The Ongoing Digital/
Technology Revolution 01
02
03
04
More Demanding Customer
Expectations For Immediate
Payments
‘Enabling’ Regulations
Entry Of Non-traditional
Players
 For the first time In Year 2015, China surpassed U.K. & South Korea in non-cash
transaction volumes
 Cards are the fastest growing non-cash payments instrument globally since 2010
Four Seismic Shifts In The Global Landscape
Source: Digital Payments 2020 Report by BCG, World Payments Report 2016 from Capgemini and BNP Pariba
More Banks Are Recognizing The Need To Adopt A Digital-First Mindset To Provide Digital Offerings

Now,
Digital Payments
In India

Plastic Card
Unstructured Supplementary
Service Data
Aadhaar Enabled Payment
System
Unified Payment Interface
Mobile Wallet
Modes Of Digital Payments
The New Way To Pay
Source: Google Search

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Roadmap Of Digital Payments Products In India
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Source: Nasscom Payment Report 2016
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Changing Consumer Landscape In India
2014 2016 2018
Users 22.6 Crore 32.1 Crore 41.1 Crore
Penetration
(% of mobile users)
18.30% 25.40% 31.70%
2014 2016 2018
Users 12.3 Crore 20.4 Crore 27.9 Crore
Penetration
(% of mobile users)
21.2% 29.8% 36.0%
Internet Users & Their Penetration In India
Smartphone Users & Their Penetration In India
83% Of Indians Don't Own A Smart Phone
Indian consumers are changing at a pace
far greater than that foreseen. This has
been the result of several drivers, whose
impact has strengthened exponentially
over the years.
Drivers:
 Changing incomes and demographic
profiles of consumers
 Growing access to the internet and
greatly increased use of smartphones
 Growing health and environmental
consciousness
 Technological innovation
 Rising complexity of decision –making
for consumers
Source: 2016 market report by Fortumo
Digital Payments are creeping into our lives

Digital Payment: Triggers Of Usage
Source:
Influencing Attributes That Define The Evolution In Digital Landscape

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The Face Of
Digitization:
Pre-Demonetization

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Cash As % Of GDP
Source: Economic times
Sweden 2% UK 3.36%
USA 7.46%Denmark 3.38%
India 12.42%

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India- Before Demonetization
Source: PwC-Disrupting Cash, 2014 & RBI
50% Of The Indian Population Did Not Have Access To Credit Or Debit Card

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The Face Of
Digitization:
Post-Demonetization

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India- After Demonetization
Need
Government
Merchants Providers
Customer
 Challenges with cash:
Cost of managing cash in India is 24
Thousand Crore P.A
 Tracking transaction for revenue generation
is difficult
 Opportunities:
 Reduction in lost sales
 Reduced processing time
 Cost Effective:
 Govt. might extend subsidy
 Convenience:
 24*7 availability of currency, payment
transfer
 Banking reach is limited
 Better offers, deals & discounts
 Technology
 Increasing in-app payments
 Mobile based financial transaction on rise
 Bank
 Increase number of transactions
Source: Cost Of Cash In India Report

Growth Pattern After November 8th, 2016
Number Of Transactions Per Day
Source: Ravi Shankar Prasad Official
The Acceptance Of New Digital Payment Is A Welcome Note For The Future of Cashless Economy

RuPay, Card Usage Jumps Manifold
Source: Digital India
India Treads The Path Of A Cashless Economy

Inflow Of Deposit
Source: Deutsche Bank
Massive Deposit Bonanza For Banks

Government Plans To Move India Away From Dependence On Cash
462
573562
801
0
10
20
30
40
50
60
70
80
90
Apr'14 Apr'15
No. Of Card Transaction (In Lakh)
Credit Card Debit Card
1460
870
1790
1150
0
20
40
60
80
100
120
140
160
180
200
Apr'14 Apr'15
Amount Of Card Transaction ( Crore)
Credit Card Debit Card
Card Payments: Is This The Saviour?
Source: RBI, RBI Media Reports
Demonetization Will Pace-Up Digital Payments In A Very Short Span

What Has Changed?

Moving Towards A ‘Non-Cash’ Society
Source: BCG Analysis, Euromonitor Passport, 2015
92%
89%
78%
60%
41%
8% 11%
22%
40%
59%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2010 2015 2020 2025
Cash Non CashSource: BCG Analysis, Euromonitor Passport, 2015
e e
Cash: 5 year
CAGR 0.8% 2.5% 5.0% 7.5%
2023e
2018e: The Point Of Inflection Where Noncash Payments Will Overtake Cash
2018e
2023e: The Point Of Inflection Where Noncash Payments Will Overtake Cash

The Party Has Just Begun For Digital Wallets In
India
A fortnight after the government withdrew old Rs 500 and Rs 1,000 currency notes:
 The number of users for Paytm surged to 1580 Lakh from 1500 Lakh
The number of Mobikwik 400 Lakh from 350 Lakh respectively

s
M-Wallet Explained
Source: Respective Marketing Information
Go to the
Paytm App
Paytm The New Kid On The Block

s
Paytm: Payment Process
Source: Respective Marketing Information

Cash-On-Delivery is dipping, eWallet Is
skyrocketing
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Source: Indian Retailers, Rocket Bazaar
• 30% decline in cash on delivery orders post demonetization
• Delivery returns climb 50% for major e-commerce marketplaces
Increased by 59%
after demonization
Indian e-commerce growth projection cut from 75% to 55.5% In 2016

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Around The World
In 60 Seconds

Leading Digital Wallets, Globally
Apple Pay
Apple Pay is Apple’s proprietary digital
wallet. It utilizes NFC technology and can
be used in many locations that have
contactless terminals.
Android Pay
Android Pay uses NFC technology to
enable payments by tapping a phone to
an NFC-enabled terminal.
PayPal
PayPal is best known as an internet-
based digital wallet for paying for
purchases from shopping websites.
Paytm
Paytm Wallet can be used to buy goods
and avail services online & offline. It can
be easily recharged via net banking and
debit & credit cards.
FreeCharge
FreeCharge lets users recharge any
prepaid mobile phone, postpaid mobile,
electricity bill payments, DTH and data
card in India.
PayUMoney
PayUMoney is an e-wallet service in
India. The wallet empowers to make
online payment via credit cards, debit
cards, netbanking etc.
Alipay
Chillr lets users send money in seconds
to anyone in phone book, without having
to know their account number, IFSC
code, or waiting for OTP.
Oxigen Wallet
Oxigen Wallet allows users to top-up
money and use it for mobile data
recharge, DTH and data card recharge.
MobiKwik
MobiKwik can also be used to recharge
mobiles and pay bills, but it's also
accepted across merchants such as
BookMyShow, eBay etc.

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The mWallet leaders - Alipay, M-PESA & bKash
 Around 50% market share in
online payments
 Around 78% market share in
mobile payments
Source: pymnts.com
 More than 100 Million Alipay wallet
users have made $148 Billion worth
of payments through mobile phones
 Alipay processed 710 Million
payment transactions
 It processed 85,900 transactions
per second
Source: globalpaymentsummit.com
 Kenyans made 4.1 Billion M-Pesa
transactions in 2015
 M-Pesa total transactions worth
$52.6 billion in the year 2015
 42% of Kenya GDP Transacted
on M-PESA in 2014-15
 Now Process 14 Million
transactions per day
 M-Pesa now stands at 21 Million
customers
Source: bloomberg.com, nation.co.ke
 24 Million Customers Using Mobile
Money
 30,000 merchants accepting bKash
 Monthly transaction volume has
exceeded USD 7.5 Million.
In June 2016, 700 organizations used
mobile money

Barriers
To
Digital Payment
Adoption

Key Barriers To Digital Payment Adoption
Source:
Complexities of Digitization

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Source: Pew Research Centre, 2016
83% Of Indians Don't Own A Smart Phone, A Prerequisite For Most Banking Apps
The Smartphone Abyss In India
India Still Has An Inadequate Telecom Network, Which Fails To Reach 250 Million Smartphone Users

 Processing capacity: The sudden upsurge in digital payment transactions will put a severe strain on the processing
infrastructure. Strain on the processing capacity will lead to customer and merchant dissatisfaction and questions be raised
on the integrity of the payments systems.
 Security of IT systems: The unstructured and mostly unplanned adoption of new payment methods raises pertinent
questions on the security and robustness of the IT systems on which these payment methods are being run.
 Security of the Mobile Apps: In fact, Qualcomm has issued a public warning that none of the digital wallets in India are
safe from a hardware security point of view.
 Social Engineering: The serpentine queues at banks and ATMs has accentuated the Jugaad mindset in India.
Consumers are cutting corners and adopting short cuts to beat the rush to withdraw cash. Indian consumers; like
everywhere else and perhaps more, are vulnerable to sharing passwords, PINs and other secure information that
compromise their accounts.
What The Experts Have To Say
Roadblocks On The Digital Route For India
Source: Sriram's article

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July 2016
Internet banned in Kashmir during protest over the
killing of Burhan Wani
September 2015
Mobile data services blocked in Godhara, Gujarat,
as a precautionary measure during the immersion
of the Ganesh idols.
August 2015
Internet services blocked for six days in Gujarat
during the Patider reservation agitation
March 2015
Internet and mobile data services blocked in
Nagaland for two days due to a mob lynching
In The Name Of Security
Some Recent Bans
Top 5 Countries By Numbers Of Shutdowns
22 22
8
6
3
India Iraq Syria Pakistan Turkey
Internet – The Key To Cashless Transactions
This entirely plausible scenario is definitely bad news for a digital economy
Shutdowns From June 2015 To May 2016
22 The number of times Indian ISP’s were shut down
during this period.
70.5 The number of days of internet blackout
81 Instances of internet black outs in 19 countries

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A Fact To Ponder Over
NEW VULNERABILITIES
Source: Brookings Institution, Boston Consulting Group
While Governments Push Digital Transactions And The Potential Of The Online Economy,
Internet Breakdowns Have Serious Financial Consequences

Indian Payment
Industry:
Revenue Opportunity

Digital Payments:
The Making Of A $500 Billion Ecosystem By 2020
 Over 10 Million merchants establishments will
accept digital /mobile payments
 ‘Aadhaar’ Enabled Payment System (AEPS) to
provide ease in banking facility to semi-urban and
rural areas
 Modified UPI will be a game changer
The Future of Digital Payments
 Contact-less payments
 Internet of Things
 Block Chain
 Voice-based Payments
 Biometric / Iris Authentication Through Mobiles
Will Any Of These Take Off?
With A Transaction Fee Ranging Between 0.50 - 0.75 % (For B2B) And 2 % (For P2P), The Indian Digital Payments
Industry Could Be Worth Approximately USD 5 Billion In Revenues By 2020
Source: BCG –Google digital payments India 2020:2016
56
4
17
224
178
1
12
09
 Currently G2B & G2G kept out of scope due to limited mobile update in
future

Special Incentives To Encourage Digital Payments
Efforts: 02 POS devices will be deployed in each of 1 Lakh villages with the population of less than
10,000 / Rural Regional Banks and Cooperative Banks to issue “Rupay kisan Cards” to 4.32 crore
Kisan Credit Card holders
Benefits: This will benefit farmers with the facility to transact cashlessely in their villages for agri needs
Efforts: Discount of 0.75% on digital payments at Central Govt. Petroleum PSUs
Benefits: This will reduce the cash requirement of nearly Rs. 2 Lakh per year at petrol pumps
Efforts: Free Accidental insurance upto Rs. 10 Lakh on buying online tickets in Railways
Benefits: It is expected that another 20% passengers may shift to digital payments
Efforts: Discount of 0.5% for monthly or seasonal tickets on digital payments from 1st Jan 2017 on
suburban railway network
Benefits: As passengers will shift to digital means the cash requirement may get reduced by Rs.
1,000 crore per year in near future
Efforts: No service tax on digital transaction charges/ MDR (Merchant Discount Rate) upto Rs. 2000
per transaction
•10% discount for toll payment on National Highways using RFID card/ Fast Tags in 2016-17
Efforts: Public sector banks advised to not charge more than Rs. 100 per month as rental for POS
terminals/ Micro ATMs/ mobile POS from merchants
Benefits: Nearly 6.5 Lakh machines by Public Sector Banks have been issued to merchants
• With lower rentals, more merchants will install such machines and promote digital transactions

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Indian Payment Industry: Revenue Opportunity
Unified Payments
Interface (UPI)
Aadhar Card
Verification
Block Chains
Internet
Of Things
Contactless
Payment
Digital Wallet / M-Payment/
P2M payment
Voice Based
Payments
Biometrics
Growth
Source: BCG –Google digital payments India 2020:2016
Digital Payments Industry To Generate Revenue Of $5 Billion By 2020

Digital Payment Channels Now In India

NPCI (National Payment Corporation Of India)
The Payment Ecosystem Of India

Thank You!
Sriram Natarajan
Chief Operating Officer
Quatrro Processing Services
Email: sriram.n@quatrro.com
Website: www.quatrroprocessing.com

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