Name- Nidhi Singh

Address- Flat number 70, Surabhi apartment

Pocket 1, Sector 11, Dwarka
Designation Visiting Faculty and Research Scholar from G.D. Goenka University
Netaji Subhash Institute of Technology,
Sector 3, Dwarka

How India moving from E-payment to M-payment?

Abstract
India is aggrandizing an exponential growth in digital payment in recent years. With the
escalating growth in internet and mobile penetration, the country is equipped in the adoption
of digital payments in the coming years. Over the last decade with the rapid adoption of
smartphone our payment landscape is also changing- it allows people to pay using their
mobile phones are promised to reduce transaction fees, increase convenience, and enhance
payment security. Furthermore, under the government initiatives such as Digital India will act
as key catalysts and enablers of this transformation.
This paper outlines the Mobile payment scene as emerging market in India, and how India is
moving from e-payment to m- payment.

Keywords: M-payment, E-payment, Cashless transaction

Background

Mobile User making the most of a growing addressable market across the India far exceeds
that of any other electronic gadget or platform. Over the last decade, high rate of smartphone
adoption, improvement in the connectivity of internet, declining the price rate of smartphone
and user friendly device make the mobile the most popular device to communicate in our day
to day life for every person. As the mobile become the most prominent device, Industry is
also shifting the paradigm towards new seamless delivery and payment experience.

Due to fall in price of data, emergence of mobile based business models, connectivity of
mobile device and popularity of M-mobile wallet is result to reduce cost of investment in
payment hardware for merchants, make the new platform of rapid adoption of mobile
payments across the globe.

Digital payments in India the new wave

As the technologies changes, the payments mode in India is undergoing a transformation:

traditionally a cash-based economy, it has seen an increase in card-based and mobile
transactions. Per source: MasterCard Advisor's Measuring progress toward a cashless
society India is a country where 98 per cent of total economic transactions by volume are
done through cash. However, this may no longer be the case in future as the government has
already steered the country towards cash less society. The impact of mobile wallets in
hastening the transition to a cashless economy is overstated. Almost 26% of population of
India has internet access, and there are only 200 million users of digital payment services.
The World Banks Global index published in 2014 shows that Indians are significantly less
familiar with digital banking the use of credit or debit cards, making transactions using
mobile phones, and using the internet to pay bills than their peers in middle-income nations.

More than two decades present in the country, e- payments have struggled to scale-up due to
the fragmented nature of the retail sector perception of it being expensive for small
merchants, high cost of card payments hardware and lack of underwriting data for credit card
issuance and merchant on boarding.

Mobile payment is the solution to the problem

Due to these inherent drawbacks of E-payment, the M-payment has started growing up as it
provides an alternative and good solution to the issues plaguing E-payments. It offers a low-
cost means to create financial access and payments. It can extend the last-mile reach of
banking services either through business correspondents (BCs) or directly to the end
consumers. Amendment in the infrastructure of telecom, access to internet connectivity and
low-cost smartphones will eliminate the need for hardware based on fixed line connections.
Mobile combines digital identity, digital value and digital authentication to create low-cost
access to financial services for instance, OTP-based authentication for Aadhar-linked
accounts and biometric authentication for processing transactions.
The flexibility to adopt technologies as varied as USSD and magnetic secure transmission
makes it capable of meeting the future needs of customers, merchants and service providers.
Since the value, itself is digital, exchange of value across various form factors of mobile
payments is easy, resulting in an interoperable platform that works on a lowest common
denominator. Customers will have the option to use various form factors for mobile
payments: one set of customers may choose carrier billing, while another can use mobile-
based credits that are delivered to their wallet.

Penetration of Point of Sale (POS) in India is low to any other country, because it is based on
4party model, in which it involves fixed and variable cost which is not sound good in terms
of cost.

Because of mobile technology, there is cut in the cost of onboarding process, hardware,
authentication and connectivity of merchants. M-payments can streamline the process of
merchant documentation, credit bureaus can provide proxies for merchant risk; and
acceptance can be enabled through an application downloaded on mobile or through SIM.
M- Mobile technology provide the higher secure gateway of payment as compare to magnetic
stripe cards.

The 3 main Challenges to mobile-based payments in India

Although mobile payments will be the most significant trends in India of the coming year and
three challenges in scaling them up.

Three Chalenges

Closed Loop Speed and

Low Digital Literacy
Payment Conectivity
First Challenge is Closed Loop Payment
In closed loop payment, allow consumer to pre-load funds into a spending account that is
linked to the payment device like customer credit/ debit card. Then customer re load amounts
during the event through a variety of mechanisms- like top-up. Unspent funds at the end of
the event are not useable outside of the event and so must be refunded to the customer or
retained by the event. Most of the mobile payment platform depend on the closed loop
payment, in which it requires pre-existing bank account. And this become the major
challenge in India of having bank account.

Second Challenge is Speed and Connectivity

Speed and Connectivity are another challenge to use m-payment. To use mobile payment
services daily, it is critical that they are ensured of easy availability of cash whenever they
require, especially in the remote part of country. Business correspondence in far area are not
easily accessible or they are inactive due to low transaction rates. To overcome up this barrier
we need a framework to ensure that BCs have availability of cash and viability. Widespread
adoption of Unified payment interface(UPI) can potentially solve the problem of cash output.

Third Challenge is Low Digital Literacy

The major drawback of m-mobile payment is a digital literacy rate in India. Still large
segment of the Indian population is not friendly with the technology. Service provider need to
simplify the technology and interface, and education their customers. There is a lack of
understanding among merchant and consumer on how they will use the mobile payment
services. Because when the transaction fail or stuck at certain point, they are unable to find
other way to proceeds the transaction.
Using the cell phone as e-wallet will help digital payments go mass market. But it needs
policy tweaks and political will.

Since last four month going cashless, has never been sound so clear, people opting another
method of payment such as credit and debit card, online money transfer and payment, use of
e-wallet, digital app. But the main challenge for online payment is low penetration in market.
As per the Reserve Bank of India, a little over 2 per cent of Indians have a credit card and
around 59 per cent have a debit card but even these are not accepted at all merchant
establishments. In cities, the acceptance of cards is high but in rural India, its scarce and
challenging.
Elevate financial inclusion
Due to low digital literacy and poor internet connectivity in urban and semi urban area
transactions from one wallet to another are not possible because of which users need to
manage multiple digital wallets. It is also natural to weigh these options on the parameters of
user trust and security. For this government, must build transparent platform which is easy to
use.

To allow mobile operators to offer Mobile as E-wallet, wherein the mobile top-ups can be
seamlessly transferred to E-wallet for making small value daily transactions. This small value
e-wallet can be offered as a bundled service to 1 billion subscribers, eliminating the need for
customer education (payment literacy). There will also not be any language barrier or
interoperability challenge since everybody knows how to do a mobile recharge.

Steps taken to overcome from the barrier

The existing regulations of RBI suggest that mobile top-up are closed wallet and can only
be used for the services offered by the respective mobile service providers.

This restricts purchases or payment of utility bills, e-commerce shopping or any other digital
purchases for third-party products and services. By allowing the telecom wallet to transact
with third-party products, the Government can facilitate small-value transactions, linking the
buyer and seller through mobile phones in a secure and reliable manner.

Mobile networks have a global standard of security and, therefore, mobile top-up wallets are
highly secure. The accuracy of telecom (minute) transactions is a testament to their technical
capabilities to handle volumes. Lets not forget, our telecom networks handle about 13 billion
outgoing minutes per day.

The reach and easy availability of a mobile phone in the hands of nearly every citizen,
whether urban or rural, has overcome the digital literacy barrier. Mobile is clearly positioned
to deliver on the goal of financial inclusion.

All we truly need is to allow mobile phones to act as digital wallets for carrying out small-
value transactions of up to 1,000 daily. With more than 100 crore mobile subscribers, this
has a potential of delivering nearly 100 billion in digital cash every day into the retail
system of the economy. The process is simple and hassle free.

Today, the mobile industry has an unparalleled distribution network supported by all possible
payment mechanisms viz. cash, select ATMs, mobile wallets, internet banking, etc. The
mobiles can also be linked with their bank accounts subject to e-KYC verification.

A mobile wallet can be loaded from a bank account or any other electronic means currently
used for mobile recharge. Moreover, the extensive retail and distribution network of telecom
operators is also available for those who may not have a bank account. Currently, the closed
wallet with telecom operators is an opportunity lost to make our society truly a less-cash
society.

This digital payment solution will be ready to use from day one. It is reliable and secure and
at the same time scalable and inter-operable on the strength of the telecom infrastructure.

Industry can differentiate between voice/data consumption and digital transactions revenues
by maintaining two different wallets. Closed wallet for telecom services and semi-closed
wallet for retail transactions.

Though the National Telecom Policy (NTP) 2012 identifies the role of mobile phones in
financial inclusion, but till now the focus has been to provide connectivity to enable delivery
of financial products. Here is an opportunity that will bring financial inclusion in its true
sense to the mass market. The line dividing rural and urban market will disappear and the
country will see true digital empowerment in the shortest time.

Conclusion

The growth of mobile money services is set to be one of the most significant trends of the
coming years. As technology advances and the mobile money ecosystem expands, mobile
phones are becoming a de-facto platform for transferring money and is unlocking potential
financial models. It is going to change the landscape of transactions. Technologies such as
fingerprint identification, facial recognition and iris scanning provide strengthened security
by authenticating users before transactions are authorized. In many parts of the world, there
are
no regulatory frameworks in place to cover these new services. Meanwhile, resistance from
merchants and a shortage of handset choice are emerging as new barriers. Participants across
many industries are looking to enter the mobile payment marketplace. Also, this is going to
bring transparency in the system. The demonetization has created domino-effect and has
accelerated the movement of India from heavy cash driven to cashless where M-payment is
going to play a big role due to high penetration of mobile in rural as well as far flung areas as
compared to low penetration of internet. The future is going to be M-payment driven and this
is going to act as last mile connectivity and help in financial inclusion of more rural people
which would have taken a decade or more otherwise.

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