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Digital Payments in India - Trends, Issues and Opportunities PDF
Digital Payments in India - Trends, Issues and Opportunities PDF
Digital Payments in India - Trends, Issues and Opportunities PDF
Issues”
Submitted by
Team 12
APRIL, 2019
ACKNOWLEDGEMENT
Although it is beyond our world power to acknowledge for the project report guidance to all those
who have co-operated with us but as matter of tradition we are trying to express it.
With great reference we would like to express our profound gratitude to Dr. Kuldeep C. Rojhe, Mr.
Narinder Verma for providing us with great opportunity of learning, keen interest, invaluable
guidance and constant inspiration which was constructive to achieve the goal throughout my project
report.
We would like to thank all the people who came across at Shoolini University. Their inspiring
guidance, indispensable support, enthusiastic mentoring and critical appreciation from our
respectable guides, staff of our organization. Our extended interactions have always been
provided to me with a stimulating atmosphere and kept my interest levels high in the course of
this project report. We would like to express our special regards towards our faculty members as
without their constant supervision we would not be able complete this project.
Lastly, we thank almighty, our parents for their constant encouragement without which this training
would not be possible and also our friends and classmates for their support and guidance.
Team: 12
CERTIFICATE
This is to certify that the Project work entitled “Digital Payments in India: Trends,
Opportunity, Issues” submitted in partial fulfilment of the requirement for the award of
degree of Master of Business Administration to Shoolini University of Biotechnology and
Management Sciences, Bajhol, Solan (H.P.) is a bonafide Projectwork carried out by Team
12. No part of this work has been submitted for any other degree or diploma.
Signature:
Place: Solan
Date : 10.4.19
Table of Content
Chapter Number Particulars Page Number
Abstract
This project report focuses on the impact and importance of digital payment in India. According to
the Government of India the digital payment will increase the employment, reduces risk related to
cash like corruption, robbery, and carrying or storage of large amount of cash and made all
transactions to be done cashless or digitalised which helps the people to transfer the money with
security and safety at high speed. The impact of this policy is a footstep towards the modernisation
and globalisation by making the economy cashless. In digital payment, banking sector plays a major
role by providing digital tools like debit cards, mobile banking, mobile wallets.In recent days many
changes took place in the payment system like digital wallets, UPI and BHIM apps for smooth shift to
digital payments. The objective of this project report is to study the optimistic impact that Digital
payment system in India.
A major obstacle for the adoption of this digital payment system in India is slow internet connectivity
and the additional charges over the digital transactions. No matter India started shadowing digital
payment policy over a year ago but still some of the sectors in India are still at the majority of cash
transactions which is acting as a big hurdle for the economy to grow itself.
The Payment and Settlement Act, 2007 has defined Digital Payments. As per this any ―Electronic
funds transfer‖ means any transfer of funds which is initiated by a person by way of instruction,
authorization or order to a bank to debit or credit an account maintained with that bank through
electronic means and includes point of sale transfers; automated teller machine transactions, direct
deposits or withdrawal of funds, transfers initiated by telephone, internet and, card payment.
India is a growing economy where 67% of the population is still from rural areas (World Bank, 2016).
No doubt we have achieved the literacy rate of 74% but sti ll a huge mass of population lacks
technological knowledge and so the problem of digitalization is big in India as compared to other
countries in the world. Automated Teller Machines (ATMs) are the first form of digitalization that
was introduced in India in the 1987. It took more than twelve years by the people to accept it as a
mode of transaction. But as the time has passed people understood how to use it and its importance
increased gradually. As the population increased in India the need of ATMs also increased in various
parts of the country so in order to reduce the rush of ATMs, RBI focused on introducing E-banking in
the country. The main focus of Reserve Bank of India (RBI) was to ensure safer and authorized
payment system to the people. With this objective Electronic Clearing Service (ECS) was introduced
1990s. In the year 2008 National Electronic Clearing cell was launched to handle multiple
transactions of individuals and corporate. It came as boon for the economy as many people find it as
easy, quick and fastest mode of transaction to transfer their funds to any part of the world. During this
transformation a national level e-Governance plan was initiated in 2006. So keeping the focus on rural
areas to expand the e-banking and better internet facilities ―Digital India‖ campaign was launched on
1st July 2015. The objective of the campaign is to develop secure and digital infrastructure, delivering
government services digitally and universal digital literacy. According to Internet and Mobile
Association of India (IAMAI) and Kantar IMRB report out of 918 million rural population of India
only 186 million are using internet and leaving out 732 million potential users. The ratio of male to
female Internet users is 64:36. No matter these digital changes have taken place about ten years ago
but it is unable to reduce dependency of the people on paper currency in the economy. To reduce the
burden of printing more currency and dependency of people on paper currency domentisation of
Rs.500 and Rs.1000 was done on 8th November 2016. Apart from this in order to inculcate the habit
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of using digital currency government unveiled two schemes namely Lucky GrahakYojana for
customers and Digi DhanVyapaarYojana for traders. The Indian government and Reserve Bank of
India is trying very hard to promote mobile banking and e-payments. Along with these efforts
recently various small finance banks and payments banks have also been brought to fulfill the motto
of financial inclusion and innovative banking solutions. While Digital India is trying its way in rural
India but the digital literacy one of the biggest hurdle in making it a great success. The IAMAI report
finds that an estimated 281 Million daily Internet users, out of which 182.9 million or 62% access
internet daily in urban area, as compared to only 98 million users or 53%, in rural India. Almost
double the proportion of Rural Users access internet less than once a month in rural India as
compared to Urban India. Therefore, to make economy digitalized a joint effort of banks,
government, educated youth and telecom industry will be required to spread the knowledge. They
have to gain the trust of the people that their money is safe if they are doing transaction digitally.
There is a requirement of making strict rules regarding cybercrime, online frauds and strengthen the
internet security.
The Digital India program is a flagship agenda of the Government of India with a vision to transform
India into a digitally empowered society and knowledge economy. Faceless, Paperless, Cashless‖ is
one of professed role of Digital India. To incentivize the move towards a cashless economy, the
Government has come up with a rash of discounts and freebies on digital transactions. But will these
be substantial enough and, along with other benefits, counter the higher risk of identity theft once the
currency notes are back in circulation? What are the gains and drawbacks of financial digitization?
Here‘s a look at what may be in store for you. The digital India mission envisioned by the
Page | 2
Government of India is aimed at transforming the country into a digital economy.
One major part of this larger program is a special focus on digital payments. The program on digital
payments is envisioned with elements such as, extending banking facilities to under banked, banking
from anywhere, expanding the base of financial inclusion, creation of digital opportunities with
national identity program and establish enhanced transparency into the systems. Digital payments are
becoming a key part of our daily lives and impacting society, business and the economy at large.
India‘s digital payment industry, which is currently worth around USD 200 Billion, is expected to
grow and to reach USD 1 Trillion by 2023, as per a report by Swiss financial services holding
company, Credit Suisse. In India, as per a recent report by RBI, total digital payment transactions
stood at 1.06 billion transactions for the month of December 2017. The Government of India is
targeting to reach 25 billion digital transactions by the end of the year (Fy2018). This significant
growth, both globally and in India, warrants stakeholder‘s concerted e orts to envision robust cyber
security and data protection policies. Such reports would go a long way in enhancing the end-
consumer trust in digital payment space and could potentially result in increase in the digital payment
market in India.
❖ The first online payments take place: Online payments began in the 1990s. The Stanford
Federal Credit Union was the first institution to offer online banking services to customers in
1994. However, early online payment systems were not very user friendly, requiring
specialised knowledge of data transfer protocol. Early players in digital payment were
Millicent and E-cash, which offered services that used micropayment systems and electronic
alternatives to cash, such as e-money, tokens or digital cash. The founding of e-commerce
pioneer Amazon in 1994 provided further impetus to these early digital payment efforts.
❖ The emergence of PayPal: One of the earliest companies to specialise in online payment was
PayPal, which started as an online money transfer service in 1999. Its popularity took off
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when it became popular with eBay users. PayPal consistently innovated, with features like
payments that could be made using email addresses, the addition of new currencies, mobile
payment apps, HTML payment buttons, and using a reverse Turing test (to determine if an
interaction was human or machine) to reduce fraud. PayPal was soon targeted by established
financial institutions and banks, as well as eBay, who attempted to have the company legally
classified as an unsecured service or bank. EBay acquired PayPal in 2002, owning it until
2015, when it was spun off as a separate company.
❖ Digital payments companies become major players: With e-commerce and online banking
becoming more established, digital payments grew quickly, with numerous digital payments
companies emerging as major players. PayPal was awarded an EU banking licence in 2007, by
which time it had 35 million customers across Europe. After eBay spun-off PayPal into an
independent company in 2015, PayPal turned its focus to reducing friction around payments.
PayPal continued to grow and, showing its current scale, recently spent $2.2 billion to acquire
Swedish payment start-up iZettle, which offers a low-cost card payment device and point of
sale app for small businesses.
❖ Digital wallets come to the fore with Apple Pay: Digital wallets have been around for some
time but have gained more traction with the Millennial generation. Stored online or on
smartphones, they are linked to bank accounts or payment cards and used to make purchases
online or in physical shops using contactless technology.
The launch of Apple Pay in September 2014 was a significant moment as it improved wallet
functionality by enabling payment cards to be added via a photo of the card and authenticating
payments via the iPhone fingerprint scanner. Credit card providers now pay the company a fee
for each transaction on the platform. Online giants Amazon and Google also offer digital
wallet functionality. Google Pay enables users to send money and split restaurant bills, while
Amazon Pay provides a secure single-click checkout process.
❖ Virtual banking comes of age: The development of digital payments opened the way for
virtual banks that focus on helping customers conduct their financial transactions digitally. In
2011, for example, e-Payments launched, giving small businesses and individuals a more
efficient and cost-effective way to receive and make domestic and international payments. The
virtual bank accounts offered by e-Payments make it simple and secure to make payments and
manage accounts via computer or mobile device, supporting a cashless approach to finances.
❖ Crypto currency gets serious: The concept of a decentralised currency – using a type of
cryptography to enable automated and untraceable digital payments – has been around for
several decades, but really took off with the launch of the Bitcoin crypto currency in 2009.
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Many crypto currencies use block chain technology, which was invented in 2008 to serve as
the public ledger of Bitcoin. A block chain is a list of records, or blocks, that are linked
together using cryptography. Each block contains a scrambled version of the previous one, as
well as a timestamp and transaction data. A block chain is secure by design, as it stops data
being modified. This made Bitcoin the first digital currency to solve the problem of double
spending – caused by replication of digital data – without requiring a trusted authority or
central server. Crypto currency is regarded as the next major milestone in digital payments
and, with block chain, promises to take the industry in new and unexpected directions in the
future.
Innovative use of technology has enabled digital payment infrastructure and the creation of innovative
products such as mobile wallets, i.e. prepaid payment instruments. The major technology capabilities
which are responsible for this revolution are, but not limited to, Smart devices, Apps, Near Field
Communication Protocol, QR Code and Mobile Wallets. It enables the end consumer to conduct
commerce with ease and from anywhere.
The Indian Government‘s thrust on digital payments is making this space affordable and
interoperable, to end-consumers, businesses and digital payment sector at large. The total number of
payment system operators in India stands at 91 till date, as per RBI report (Jan 2018). Mobile wallet
transactions have risen 590.30% year-on-year as of Jan 2018. In 2016-17, as per the RBI Bulletin (Jan
Page | 5
2018), the prepaid payment instruments (PPI) transactions stood at 1.963 billion (volume) and INR
838 billion (in value). In India, the introduction of United Payment Interface (UPI) is also making a
significant impact; as per NPCI, from Fy-2017-18 (Apr‘17 to Mar‘18), transactions on this platform
were to the tune of INR 509.62 billon (value) and 413.95 million (volume). Similarly, as of Dec 2017,
as per NPCI data, Aadhaar based transactions stood at 1900 million (volume) from Apr‘17 to Mar‘18.
Retail digital payments leveraging NPCI platforms are also on the rise.
Figure 1.1:
As India rapidly transitions to a digital payment ecosystem, threats are also moving from cash to
Page | 6
cyber and the nascent ecosystem is already facing sophisticated cyber attacks. As such, stakeholders
may need more capabilities, processes, standards and best practices to detect, prevent or respond to
advanced threats in the digital payment ecosystem. Recently a banking organization in India was hit
by a cyber attack, it was discovered that INR 25 crore was pilfered from multiple accounts due to a
bug in a digital payment application and also a mobile wallet organization has a loss of INR 19 crore
due to vulnerabilities in its own online payment system.
There are two official sources on Digital Payments, They are RBI and MeitY, both of which are
relevant and important. The narrative on the growth trends which covers the period from 2011-12 to
2017-18 is presented separately for both the data sources. The analysis covers the trends over the
years 2011-12 to 2015-16 ie. Years preceding demonetization and compares the growth trends over
the last two years ie. 2016-17 and 2017-18 which is the post demonetization period.
The volume of overall payments steadily increased over the period 2011-12 to 2015-16, recording a
compound average annual growth rate (CAGR) of over 58.9 per cent. The rate of growth in volume of
overall payments further accelerated to 104.4% per cent in 2017-18. Graph 1 indicates the trends in
Digital Payments over the period of 2011-12 to 2017-18. The growth in 2017-18 is spectacular and
could be attributed to development of innovative digital payments platform such as BHIM-UPI,
BHIM Aadhaar and Bharat QR Code. It is noteworthy that the growth in 2017-18 is much higher than
the trend growth rate over the last five years (2011-2016).
Table1.2: The following analysis on growth trends is based on data provided by RBI
Page | 7
Annual growth
25000 120%
CAGR-58.9%
100%
20000
80%
15000
60%
10000
40%
5000
20%
0 0%
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
volume(in mn) 950 1450 2200 3350 6070 10130 20880
Annual Growth 0% 52.60% 51.70% 52.30% 81.20% 66.90% 104.40%
The volume of overall payments steadily increased over the period 2011-12 to 2015-16, recording a
compound average annual growth rate (CAGR) of over 28.4 per cent (Graph 2). Graph 2 indicates the
trends in Digital Payments over the period of 2011-12 to 2017-18. There is a clear surge in 2016-17
(Growth rate of 56%) and subsequent moderation in the growth (Growth rate of 44.6%) in 2017-18.
Notwithstanding this it is noteworthy that the growth in 2017-18 is much higher than the trend growth
rate over the last five years (2011-2016).
Graph 2- As per MeitY data in 2017-18 the growth is 104.4% whereas as per RBI data the growth is
44.6%. This is explained by the fact that the data components of MeitY and RBI vary.
Figure1.3: Value – Overall Growth Performance: Meity does not disseminate value data in public domain
Page | 8
Annual growth
18000 60.00%
16000
50.00%
14000
10000
30.00%
8000
6000 20.00%
4000
10.00%
2000
0 0.00%
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
volume(in mn) 2589 3011 3711 4717 7047 10991 15889
Annual Growth 0.00% 16.30% 23.20% 27.10% 49.40% 56.00% 44.60%
• The nominal value of overall payments also increased every year over 2011-12 to 2015-16, though
not steadily, recording a CAGR of nearly 12.7 per cent during the same; But the annual growth has
shot-up to 31.1% in 2016-17 due to demonetization. However, in 2017-18 growth rate has sharply
declined to 11.9%. Graph 3 indicates the trends in Digital Payments over the period of 2011-12 to
2017-18. There is a clear surge in 2016-17 (Growth rate of 31.1%) and subsequent slowdown in the
growth (Growth rate of 11.9%) in 2017-18.
This trend in the digital payments growth has also been accompanied by the rising currency in
circulation after demonetization. The outstanding stock of currency in circulation which hovered
around 12 per cent of GDP during 2011-12 to 2015-16, declined to 8.8 per cent during 2016-17,
reflecting the impact of the demonetization. But as per data of RBI available in April 2018 this trend
has reversed as the outstanding stock of currency in circulation has climbed back to 11.3 per cent of
GDP.
Page | 9
Annual growth
3000000 35.00%
2500000 30.00%
CAGR-12.7%
25.00%
2000000
20.00%
1500000
15.00%
1000000
10.00%
500000 5.00%
0 0.00%
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
vol(in mn) 1066529 1312555 1042000 1580617 1723425 2258781 2527539
Annual growth 0.00% 23.10% 4.20% 5.40% 9.00% 31.10% 11.90%
Hence this warrants pertinent stakeholders to gear up, prepare and collaborate to provide secure and
reliable prepaid payment instruments to the end consumers. This study is an e ort to build a set of
recommendations towards securing the emerging prepaid payment instruments ecosystem in India.
Its initiatives such as Jandhan Yojana, Aadhaar, introduction of BHIM app and the emergence of UPI
have driven financial inclusion across the country, and promise to change the payment scenario in
India. Over the next decade the global payments landscape will evolve even faster due to mass
adoption of e-payments and innovations introduced by new and disruptive market players. India will
be at the forefront of this payments transformation.
The current payments ecosystem will also be redefined by regulatory changes that will cover not only
the new disruptive services of start-ups but also the evolving service bouquet of traditional players. In
the near future, payment platforms will not just be commoditized solutions but also be cutting-edge
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platforms that will deliver to changing lifestyles of consumers.
Major card networks have released technical standards for payment tokenization solutions, which are
poised to become hygiene factors in any payments service, and its adoption will soon become
imperative. ACI Worldwide, a leading global provider of payment and fraud prevention solutions,
advocates an all-in-one approach to payment transactions that includes a fraud screen for payments of
any value to protect both consumers and businesses from the costs of nefarious transactions.
2. To find out whether India will turn out to be a successful cashless society.
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Chapter II
Understanding Concept Of
Digital payments:
Methods, Trends,
Opportunity and issues
2.1 METHODS OF DIGITAL PAYMENT SYSTEMS
The Digital India programme is a flagship programme of the Government of India with a vision to
transform India into a digitally empowered society and knowledge economy. ―Faceless, Paperless,
Cashless‖ is one of professed role of Digital India.The payment system could be bifurcated into two
main segments. The first segment consists of instruments which are covered under Systemically
Important Financial Market Infrastructure (SIFMIs) and the second segment consist of Retail
Payments.
As part of promoting cashless transactions and converting India into less-cash society, various modes
of digital payments are available.
1 BANKING CARDS
Banking cards offer consumers more security, convenience, and control than any other payment
method. The wide variety of cards available – including credit, debit and prepaid – offers enormous
flexibility, as well. These cards provide 2 factor authentications for secure payments e.g. secure PIN
and OTP. RuPay, Visa, MasterCard are some of the example of card payment systems. Payment cards
give people the power to purchase items in stores, on the Internet, through mail-order catalogues and
over the telephone. They save both customers and merchants‘ time and money, and thus enable them
for ease of transaction
➢ How to get it:
1. Provide KYC (Know Your Customer) information to open a new account
2. Apply for Card with option of Debit / Credit Card
3. Get a PIN
➢ Service Activation:
1. Visit an ATM to activate PIN
2. May take about 3-7 days
➢ What is required for Transaction?
1. PoS terminal or online payment gateway
2. Present Card physically or card details for online transaction
3. Provide PIN
4. Provide OTP (One Time Password) received on registered mobile to complete online transaction
for merchant website.
5. Self-service and/or Assisted mode.
➢ Transaction Cost:
1. NIL to customer for merchant transactions.
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2. Annual fee and limits on ATM transaction by banks discretion.
3. 0.50% to 2.25% paid by merchant
4. Cash-out charged to customer in case of credit cards @ 1% to 3.5% of transaction value.
➢ Services Offered:
These cards can be used at PoS (Point of Sale) machines, ATMs, microATMs, Shops, wallets, online
transactions, and for e-commerce websites.
1. International cards can be used across globe for multiple currencies
2. Funds Transfer limit:
3. User can set up transaction limit based on card.
*99# service has been launched to take the banking services to every common man across the
country. Banking customers can avail this service by dialing *99#, a ―Common number across all
Telecom Service Providers (TSPs)‖ on their mobile phone and transact through an interactive menu
displayed on the mobile screen. Key services offered under *99# service include, interbank account to
account fund transfer, balance enquiry, mini statement besides host of other services. *99# service is
currently offered by 51 leading banks & all GSM service providers and can be accessed in 12
different languages including Hindi & English as on 30.11.2016 (Source: NPCI). *99# service is a
unique interoperable direct to consumer service that brings together the diverse ecosystem partners
such as Banks & TSPs (Telecom Service Providers)
➢ How to get it:
1. Provide KYC (Know Your Customer) information to open a new account
2. Mobile no. should be linked with bank a/c
3. Register for USSD/Mobile Banking
4. Get MMID (Mobile Money Identifier)
5. Get MPIN (Mobile PIN)
➢ Service Activation:
1. None
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2. 1-2 minutes
➢ What is required for Transaction?
1. Remember MMID
2. Remember MPIN
3. Dial *99#
4. Registered mobile number with any phone (feature or smart)
5. Self Service mode
➢ Transaction Cost
1. NIL by system
2. Rs. 0.50 charged to customer
(The transaction costs are based on available information and may vary based on banks.)
➢ Services Offered:
1. Balance enquiry
2. Mini Statement
3. Funds transfer
4. MMID
5. A/c no.
6. Aadhaar
7. Know MMID
8. Change M-PIN
9. Generate OTP
➢ Funds Transfer limit:
1. Rs 5,000/day
2. Rs 50,000/annum
Page | 14
2. 1-2 minutes‘ post Aadhaar seeding
➢ What is required for Transaction?
1. Micro ATM
2. Remember Aadhaar
3. Give Bank name
4. Present self (Aadhaar holder) with Bio-metrics (Finger and/or IRIS)
5. Assisted mode
➢ Transaction Cost:
1. NIL to customer
2. Merchant or BC may get charged or paid based on bank‗s discretion
3. Disclaimer: The transaction costs are based on available information and may vary based on banks.
➢ Services Offered:
1. Balance Enquiry
2. Cash Withdrawal
3. Cash Deposit
4. Aadhaar to Aadhaar funds transfer
5. Payment Transactions Funds Transfer limit: Banks define limit. No limit for RBI.
Page | 15
➢ What is required for Transaction:
1. Smartphone with internet facility
2. Registered device only
3. Use registered MPIN
4. Self Service Mode
➢ Transaction Cost:
1. NIL to customer by most Banks
2. Customer pays for data charges
(The transaction costs are based on available information and may vary based on banks.)
➢ Services Offered:
1. Balance Enquiry
2. Transaction History
3. Send / Pay Money
4. Virtual Address
5. A/c no. & IFSC code
6. Mobile no. and MMID
7. Aadhaar (to be made functional)
8. Collect Money
9. Virtual Address
10. Add bank account
11. Change / Set MPIN
12. Notifications
13. A/c Management
➢ Funds Transfer limit:
1 lakh / transaction
5 MOBILE WALLETS
A mobile wallet is a way to carry cash in digital format. You can link your credit card or debit card
information in mobile device to mobile wallet application or you can transfer money online to mobile
wallet. Instead of using your physical plastic card to make purchases, you can pay with your
smartphone, tablet, or smart watch. An individual's account is required to be linked to the digital
wallet to load money in it. Most banks have their e-wallets and some private companies. e.g. Paytm,
Free charge, Mobikwik, Oxigen, Rupee, Airtel Money, Jio Money, SBI Buddy, its Cash, Citrus Pay,
Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, Speed Pay etc.
Page | 16
➢ How to get it:
1. Option to open Zero KYC or Full KYC wallet
2. Option of Consumer vs. Merchant wallet
3. Mobile Number
4. An App to be downloaded in smart phone
➢ Service Activation:
1. Load money (subject to regulatory limits) using internet banking or merchant locations
2. Bank A/c
3. All Cards
4. Cash-In
➢ What is required for Transaction?
1. Smartphone or internet
2. Use MPIN
3. Self-service and/or Assisted mode
➢ Transaction Cost:
1. Customer pays for remittances to bank a/c @ 0.5%-2.5% of fixed fee.
2. May pay for data charges in self-service mode. (The transaction costs are based on available
information and may vary based on banks.)
➢ Services Offered:
1. Balance Enquiry
2. Passbook/ Transaction history
3. Add money
4. Bank A/c
5. All Cards
6. Cash-In
7. Accept Money
8. Pay money
9. Another wallet (mobile no.) with same provider
10. Pay merchant
11. Bar Code reader
12. Manage Profile
13. Notifications
➢ Funds Transfer limit:
For Users
Page | 17
1. No KYC - Rs 20,000/ month (revised from Rs 10,000 to current till 30th Dec. 2016)
2. Full KYC – Rs 1,00,000/- month
For Merchants
1. Self-Declared - Rs 50,000/ month
2. With KYC – Rs 1,00,000/- month
6 BANK-PRE-CARDS
➢ How to get it:
1. Provide full KYC (Know Your Customer) information to open new account
2. Apply for Wallet/ Pre-paid Card
3. Get a MPIN / PIN
➢ Service Activation:
1. Load money (subject to regulatory limits) using branch, or internet banking
2. Bank A/c
3. All Cards
4. 1-2 days for card
5. 5-7 minutes for wallet
➢ What is required for Transaction?
1. Smartphone or internet
2. Use MPIN
3. Self-service and/or Assisted mode
➢ Transaction Cost:
1. On loading the pre-paid card, Customer may pay service charges for transaction or fixed fee,
upfront + each transaction.
2. Loading wallets is mostly free.
3. Merchant is charged fee 0.50% to 2.50 %
4. Cash out is charged to customer as fixed fee or 1% to 2.5% of value of transaction. Only from
Cards
(The transaction costs are based on available information and may vary based on banks.)
➢ Services Offered:
1. Balance Enquiry
2. Passbook/ Transaction history
3. Add money
4. Bank A/c
Page | 18
5. All Cards
6. Accept Money
7. Pay money
8. Another wallet (mobile no.) with same provider
9. Pay merchant
10. Bar Code reader
11. Cash-Out (Cash withdrawal)
12. Touch and Pay
13. Manage Profile
14. Notifications
➢ Funds Transfer limit:
For Users
Rs 1,00,000/- for Users
For Merchants
Self-Declared - Rs 50,000/ month
With KYC – Rs 1,00,000/- month
Page | 19
3. Assisted Mode
4. Funds Transfer limit:
5. No limit for regulator
6. Merchant‘s Bank and payee Bank may set limit based on its own discretion
(The transaction costs are based on available information and may vary based on banks.)
➢ Service Available from no. of operators:
1. Source RBI – Aug‘16
2. 14.62 lakh
3. Interoperable
4. Mobile PoS
➢ Necessary conditions for service initiation:
1. Smartphone
2. App from bank
3. Integrated or external card and /or bio-metric reader
4. Reader connects using jack or Bluetooth
5. Internet connectivity 2G/3G/4G, or Wi-Fi
6. QR code and Bar code reader
➢ Service Activation:
1. Merchant Bank a/c
2. Download App
3. Register device and/or mobile with merchant bank a/c and bank
4. May require training or readable instructions
➢ What is required for Transaction?
1. Any Card
2. Resident for bio-metric auth (AEPS) for registered devices
3. Wallet account
4. Scanner for reading QR Code and Bar Code
5. Self-service and/or Assisted mode
6. Funds Transfer limit:
7. No limit for regulator
8. Merchant‘s Bank and payee Bank may set limit based on its own discretion
9. Virtual PoS
(The transaction costs are based on available information and may vary based on banks.)
➢ Necessary conditions for service Initiation:
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1. Smartphone and /or Web browser
2. Internet connectivity 2G/3G/4G, or Wi-Fi or landline
3. E-payment gateway
4. Virtual A/c for transactions
5. May need QR code
6. Service Activation:
7. Merchant Bank a/c with some merchant credentials
8. In case of QR code for pull transactions
9. May require ability to identify or authenticate user for service delivery
➢ What is required for Transaction?
1. Any Card
2. Wallet Account
3. Scanner for reading QR Code and Bar Code
4. Funds Transfer limit:
5. No limit for regulator
6. Merchant‘s Bank and payee Bank may set limit based on its own discretion.
8 INTERNET BANKING:
Internet banking, also known as online banking, e-banking or virtual banking, is an electronic
payment system that enables customers of a bank or other financial institution to conduct a range of
financial transactions through the financial institution's website.
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six settlements from 8 am to 1 pm on Saturdays.
➢ Real Time Gross Settlement (RTGS)
RTGS is defined as the continuous (real-time) settlement of funds transfers individually on an order
by order basis (without netting). 'Real Time' means the processing of instructions at the time they are
received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer
instructions occurs individually (on an instruction by instruction basis). Considering that the funds
settlement takes place in the books of the Reserve Bank of India, the payments are final and
irrevocable. The RTGS system is primarily meant for large value transactions. The minimum amount
to be remitted through RTGS is 2 lakh. There is no upper ceiling for RTGS transactions. The RTGS
service for customer's transactions is available to banks from 9.00 hours to 16.30 hours on week days
and from 9.00 hours to 14:00 hours on Saturdays for settlement at the RBI end. However, the timings
that the banks follow may vary depending on the customer timings of the bank branches.
2.2TRENDS:
The payments industry, already one of the most dynamic sectors in financial services, continues to
evolve, propelled by technological and operational innovations from established players and FinTech
firms.
A number of individual, near-term trends are disrupting and reshaping the payments landscape. They
include differentiated services or experiences; technology- and data-driven options for how to pay and
receive payment; infrastructure modernization; incumbent-FinTech collaborations; targeted
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megersand acquisitions (M&A); and workforce evolution. What‘s often more difficult—and more
important—is to discern what implications these trends, collectively, may have for payments
companies over the next year or two.
One outcome we expect to see is trends-driven product commoditization and convergence, which
should encourage payments companies and FinTechs to consider where they are in the industry today
and how they can get where they want to be. Specifically, organizations need to determine how to
effectively organize around, operate within, and benefit from six industry trends, and which business
model(s) to adopt, to help reach their desired future state.
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6. Building the next-generation organization to support the desired business outcomes.
While all financial services organizations manage geopolitical, legal, and social forces bearing down
on them, it is crucial for payments organizations to reconsider how and whether their workforce can
keep pace in an ever-accelerating digital environment. Adding complexity, organizations face
mounting pressure from an evolving workforce. Data indicates that 47 percent of current jobs will be
gone by 2028 due to advancements like robotics and cognitive capabilities, and 40 percent of the US
workforce will consist of contingent workers by 2020. Further, engaging multigenerational employees
who may have disparate values and backgrounds creates additional complexity. The 56-million-strong
millennial workforce, with native digital capabilities, must work alongside the 41 million Baby
Boomers that represented a quarter of all US employees in 2017.Payments organizations face the
compound challenge of rightsizing engagement and employee value propositions in an effort to
accommodate diverse demographic needs, while asking more of their employees to help keep pace
with digital change. Ignoring these workforce transition needs is not an option. And as a result, some
companies may need to restructure their organizations to become more agile by breaking down silos
and organizing around customer solutions rather than individual offerings.
While Bitcoin and the rest of its cryptocurrency cohorts have dominated the headlines and inspired
millions of words in digital and physical ink, there are a host of fintech applications and industry
subsections that have remained outside the spotlight. Those applications will see increased adoption
over the next few years and solidify the notion that fintech is here to stay. Fintech is transforming the
financial services industry, and will continue to do so as the industry makes the shift to fostering
innovation. Fintech products improve the ease with which people can make cross border remittances,
increase the number of data points used to make loan decisions, automate regulatory functions, and
more. The breadth of fintech project types has expanded greatly over the past few years, with
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innovation in multiple fintech subcategories driving adoption in sectors such as insurance and
regulation. Insurance technology, a branch of fintech, has seen machine learning applications
automate internal processes and claim processing.
● Prediction: Robotics Process Automation (RPA) software will be widely used in 75% of
financial services institutions by the end of 2019.
RPA refers to robotics process automation software programs that automate repetitive human
processes by utilizing the exact same application interface a human would, eliminating built-in human
inefficiencies. For example, a robot might carry out a data entry task utilizing Microsoft Excel and the
company CRM software.The robot would use the exact same applications to get the task done, but
would finish much more quickly, its speed being limited only by the speed of the various applications
it would use. The financial services industry in particular contains a large amount of roles built
around data entry and repetitive tasks. Robots, provided they are trained properly, can take care of
these tasks for any department.Robots cost around $15K annually per unit, with an initial
implementation cost of $40K–$50K per robot. That‘s a lot of money in start-up costs, but companies
typically see 40–100% ROI within 3–8 months. The annual cost of running a robot to help with
automation is nothing compared the cost of paying someone to do the same tasks much less
efficiently.Robotics Process Automation can and will help financial services institutions increase
efficiency and eliminate wasted time, particularly when it comes to tedious, easily repeatable tasks.
As of the end of 2017, 11% of financial institutions viewed themselves as having adopted RPA
widely across their organization. The improvements seen in robots as well as an improvement in the
knowledge about RPA and its potential use cases will drive an upswing in adoption and deployment
in 2019, and continue over the next few years.
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2. Mobile Payments Grow Globally
● Prediction: the worldwide volume of mobile payments will grow by 60% over the next two
years. Mobile payments‘ growth will exceed 75% in Latin America and sub-Saharan Africa
during the same period.
The worldwide mobile banking and payments industry is massive, processing over a billion dollars
per day in 2017. Latin America and sub-Saharan Africa in particular have seen widespread adoption
of mobile payments because of financial exclusion. Financial exclusion refers to situations in which
financial services (banking, payments, etc.) are not available. This often occurs in more economically
disadvantaged areas, or areas that traditional financial services institutions have deemed not worth the
investment.
Barriers to entry put up by traditional brick-and-mortar banks have catalyzed the development and widespread
use of mobile banking as both a primary and exclusive method of financial management. The proof of
identification and funds that traditional bank applications require bar some from qualifying for an account,
while distance to a brick-and-mortar location (experienced by those in rural areas) is a barrier for others.
Mobile payments allow them to gain some degree of financial inclusion without meeting the standards
typically set by traditional financial institutions.
Mobile banking can be far more accessible than traditional banks, and smartphone adoption is driving that
accessibility. Anyone with a smartphone and internet access can become a part of the financial system without
the need to open a traditional bank account.
In sub-Saharan Africa, one of the regions with the most potential for mobile money use, 21% of residents
currently had a mobile money account in 2017, double the number that did in 2014. If the past is any
indication, the mobile money market will continue to grow at an astonishing rate in the region, as well as in
other regions with low financial inclusion but relatively widespread internet access and smartphone use.
Mobile banking will continue to grow rapidly, particularly in areas currently reliant on the technology. In
addition, blockchain will tie itself into the industry and become an integral part of fintech within the mobile
banking industry. Blockchain technology will provide an immutable record of personal data for individuals
looking to use mobile payment solutions, giving the industry an added layer of security. The security inherent
in these blockchain solutions will prevent fraud and improve the ability for people to become part of the
financial system.
Another development that will support mobile payments adoption is the development and deployment of 5G
technology. For mobile banking to become ubiquitous, the development of 5G technology is paramount. 5G
tech reduces latency and transaction times, which is key to ensuring the network can handle the amount of
transactions at scale.
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● Prediction: Blockchain technology will open up opportunities for the unbanked or under
banked to gain financial inclusion. The number of unbanked will fall from 1.7 billion to under
1 billion by the end of 2020
The large swath of people who will gain financial inclusion will stem from the increased adoption of
mobile banking, driven by blockchain implementation. Financial inclusion refers to individuals and
businesses having access to financial products and services, such as a bank account, loans, and credit.
An increase in financial inclusion means an increase in the number of people actively contributing to
the transfer and movement of money around the globe, which is a positive. It also means there are
more opportunities for financially included individuals and businesses to improve their situations,
build and leverage credit for growth opportunities, and more.
There are massive markets waiting to be tapped by fintech companies looking to expand the number
of the financially included. While there may be a degree of altruism driving fintech application
development geared towards increasing financial inclusion, the real motivator is the size of the
market.
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Blockchain pushed fintech into the media spotlight, and blockchain technology will drive mobile
banking adoption outside of the high growth areas in which it currently maintains the most market
share.
While cryptocurrency may never solidify itself as a mainstay in the markets due to its volatility
and the uncertainties regarding its viability as a store of value, the underlying technology is
applicable. Blockchain, by providing unbanked individuals a verifiable, easily created online identity,
will allow more individuals to be financially included than ever before.
2.4 OPPORTUNITIES
1. Rural Areas
Rural areas always have a huge impact on the overall economic development of any country. In the
same remote are you find that most people do not have bank accounts. By using mobile wallets
people can conveniently create bank accounts without physically going to a bank branch. Mobile
wallets also present transparency in a business transaction in the rural area. The increasing number of
mobile and internet users in the rural area will pave ways for the use of better digital payment solution
over time.
2. Payments and Loyalty
Most households in the United States have joined more than 15 consumers‘ loyalty program but only
participate in less than eight. Research shows that most consumers are reluctant in using a consumer
loyalty program if it is not accompanied by a Smartphone app. A total of 69% of people reported that
they continuously use they loyalty card if it was on their phone.
The secret to mobile payment usage is loyalty, not payment. It is clear that consumers engage more
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with brands that they are loyal to. Companies can gain consumer engagement by offering discount
and rewards within mobile wallets.
3. Increase in Number of Smartphone Owners
Not long ago surveys were carried out to show the growth of Smartphone ownership. Now, 4 in 10
people own a Smartphone. The number is still growing as more people are anticipated to be owners of
a Smartphone. With the high increase in Smartphone owners, so is the number of mobile payment
users. Consumers can only use a Smartphone to make mobile payments hence this cannot happen if
they do not have one.
4. Increased Interest in Mobile Payment among Smartphone Owners
More people who own a Smartphones understand and are interested in cashless payment than before.
This is evident in the younger and the more tech-savvy population. The Federal Reserve survey
pointed out that 3 in 10 people are open to using cashless payment if the opportunity arises.
More people in today‘s world have shopping apps on their phones. They check prices, research items,
purchase goods, and check receipts and coupons. This shows that price indications and detailed
information increase the gratification of mobile-oriented consumers. Most of this consumer would be
interested to use their mobile wallets instead of credit cards.
5. Mobile Banking and Inventive Mobile Payment Application
More banks are now offering mobile banking services to their customers. A huge number of mobile
owner use this service to transfer money from one account to the other, check their balance and recent
transaction. This service acts as a catalyst to increase the use of cashless payment. Financial
institutions have also come up with inventive applications for mobile transfer.
Mobile remote deposit capture is one of the applications that is steadily gaining popularity. Through
the application, consumers can easily deposit their checks by taking a photo of the check and sending
it electronically to the bank. This promotes efficiency and convenience for the bank and the
consumer. Satisfied mobile banking consumers are more likely to adapt to mobile wallets than other.
An average user of digital payment instrument today uses the instrument across stays three different
use cases, and typically uses the instrument 7-8 times in a month. While consumers have exhibited an
enthusiastic response towards digital payments, they have also voiced several concerns that act as
impediments preventing their shift to and belief in digital payment methods.
➢ Habit to use cash:
A large percentage of the Indian population is still habituated to cash even when making online
purchases with 68 % of the surveyed consumers admitting to using cash as a means of payment. This
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has led all leading national and international players in the e-commerce arena to include cash on
delivery as an option to suit Indian consumers. Consumers also feel that spending money in cash aids
in budget management and keeps spending patterns in check. Although they acknowledge that
handling cash is inconvenient, they are satisfied with the way it works and are not enthusiastic about
changing how they handle money very easily as it is so ingrained in their day-to-day life.
Figure 2.2 | Key Barriers for Adoption
Fraud/hid Inertia of
den Non-cash
charges methods
(27%) (33%)
Complexity Incentives/off
of using ers from
(55%) other
methods
(29%)
Lack of
compelling Reach
value
proposition
(16%)
(48%)
Habit to use
cash (68%)
Sources: Google–BCG market study based on Nielsen consumer survey of 1,516 consumers, 2016.
➢ Complexity of usage:
Product complexity is considered to be one of the biggest reasons behind non-usage of digital
payments. 1 in every 2 non-users do not use digital payments because they find it ‗too complicated‘ to
understand. (Refer Exhibit 3.5). In fact, 1 in 3 non-users admit to not knowing how to use the product
while 1 in 5 think it to be too complicated to try. As digital payments target heterogeneous user and
merchant segments across the value chain product design needs to ensure that the solution is built for
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the base and communicated appropriately. This is critical for universal acceptance. In comparison,
cash is still the most preferred instrument of payment, simply because of its absolute ease of
understanding even though it is not the most convenient option. Payment innovations have to ensure
increasing simplicity of the product. A large range of value propositions, standards and technologies
are likely creating confusion and excluding unevolved users, unless they are communicated clearly
and built for the base.
➢ A Perceived lack of compelling value proposition:
About half of the users who had never tried a digital payment instrument, said that the reason they
haven‘t used it is because they could not fully comprehend the benefits or value. It is evidenced in the
fact that they have not heard a lot of people use or talk about digital payments. This does not give
them a very strong motivation to alter behavior or adopt digital payments. For non-users, the chief
barriers to trial are habit of using cash, complexity, and lack of a compelling value proposition offered
by a digital payment method. In order to acquire customers onto a digital payment instrument, certain
key points need to be addressed by the payment service providers. The offering can be made more
appealing through incentives and offers to enable adoption. In addition, the user interface needs to be
intuitive and simple to ensure a seamless customer experience. To drive mass adoption by consumers,
expanding merchant acceptance is critical. Providers can also look to educate customers and
communicate the benefits clearly.
➢ Inconvenience
low reach and possibility of making mistake arresting usage. Consumers who have tried using digital
payments but have now shifted to other modes such as cash, card, online banking etc., say that
inconvenience of remembering login credentials, insufficient acceptance, possibility of a technical or
to win back churned consumer‘s payment service providers need to address critical pain points.
For example, introducing biometric authentication would eliminate the need of multiple user names
and passwords. Furthermore, acquisition and integration of merchants under the system would
increase the use cases and thereby increase acceptance of digital payments. High frequency
transactions must be brought under the ambit of digital payments to urge consumers‘ movement in
that direction. Auto-sweep features can aid in addressing low account balances and the maintenance
of requisite minimum balances in the digital payment account.
➢ Security, identity theft and fraud are not big barriers in India:
Primary research data indicates that fraud and hidden fees do not emerge as top reasons hindering
digital payment instruments. In fact, 2 in 3 consumers who have never used any digital payments
instrument, have no fear of fraud / hidden charges. Even for those customers who tried and quit, the
likelihood of fraud, identity theft and hidden charges did not feature as prominent pain points.
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➢ Out of 4 merchants believe digital will grow big, accelerating future sales:
According to 84 percent merchants participating in the survey, the most important driver for digital
payment usage amongst merchants, who are aware of digital payments, is convenience over cash. The
re- search also highlights the fact that most merchants struggle with small change, with some literally
paying money to obtain the requisite change to manage their day. Merchants value the avoidance of
this struggle for change, the convenience of not having to store and manage cash, and the added bene-
fit of being able to account for and track transactions. 75 % of merchants believe that using digital
payments would accelerate future sales. The possibility of additional sales is another primary
motivation that draws merchants to digital payments. 75% of merchants believe that the acceptance of
digital payment instruments would accelerate future sales.
Sources: Google–BCG market study based on Nielsen consumer survey of 1,516 consumers, 2016.
➢ No clear benefits, proclivity towards cash and complexity are key barriers for merchant
trials:
87% merchants who have never tried digital payments state that digital payment instruments do not
offer significant advantages / value benefits over existing methods such as cards. They are used to
dealing in cards and believe that other methods pro- vide better incentives and given many other
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options, there does not exist a catalyst to drive adoption of digital payments.
➢ Transactional speed:
Itis critical while competing with cash. Even though time saved in managing large bills in cash,
finding change, or engaging in daily cash counts and bank trips is acknowledged, the loss of time in
peak hours due to time consuming transactions and falling quality of customer experience given
delays in accepting digital payments are perceived to be serious challenges. 78 percent merchants
prefer cash.
The complexity of use presents a problem for merchants, some merchants who don‘t Accept
payments by wallets, are unclear of how it works or find it very complicated. They also feel that there
is not enough pull from customers as not many customers currently ask to pay using digital payment
instruments.
Table 2.4 | Trigger for Digital Payment Usage for Merchants
Increase sales
24X7 access (77%)
(75%)
Competitive
Marketing Customer use
advantage
(23%) it (14%)
(37%)
Sources: Google–BCG market study based on Nielsen consumer survey of 1,516 consumers, 2016.
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Figure 2.5| Key Barriers for Merchant Trials
No clear benefits
Proclivity towards
over other payment Lack of Clarity (77%)
Cash (78%)
methods (87%)
Sources: Google–BCG market study based on Nielsen consumer survey of 917 merchants, 2016.
➢ Proclivity towards cash, complexity and perceived lack of value proposition are barriers
for trials:
A real problem that is also presented by digital payments is the perception of inferior technology and
poor supporting infrastructure. 48 % merchants do not want to try digital payments as they are wary
of technical issues during the transaction leading to them being stuck between the payment service
provider and customer. Merchants would also prefer having a physical access point for managing
disputes or for query resolution.
Education, in-store demonstration or workshops etc. would be crucial in on-boarding of merchants.
Providing resources to merchants in seeking assistance and information on platform usage or queries
would encourage merchants to invest in a good internet net- work, leading to seamless transaction
speed and quality. It will help in retaining higher number of merchants in the digital system.
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and Prepaid Payment Instruments (PPI) transactions combined. Prepaid instruments trans- actions
almost 2X of mobile banking transactions.Within the next 4-year span, PPI (mWallet and prepaid
card) transactions have grown
Mobile
banking
No. of
transactions(mi
Year llion)
201
2-13 53
201
3-14 95
201
4-15 172
201
5-16 387
450
400 387
350
300
250
200 172
150
95
100
53
50
0
2012-13 2013-14 2014-15 2015-16
No. of transactions(million)
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Prepaid
Instrument
s
No. of
transactions(mill
Year ion)
2012
-13 66
2013
-14 133
2014
-15 314
2015
-16 747
800 747
700
600
500
400
314
300
200 133
100 66
0
2012-13 2013-14 2014-15 2015-16
No. of transactions(million)
much more rapidly to become almost double of mobile banking transactions in the same period. In the year
2015-16, around 747 mil- lion transactions occurred through mWallet and prepaid cards combined, whereas
only 390 million transactions happened through mobile banking. This being said, the majority of transactions
through mWallet are smaller with an average ticket size of INR 620, while mobile banking transactions are on
an aver- age INR 10,400 per transaction, notching up a gross annual transaction value of INR 4,000 billion.
mWallet is largely preferred for micro transactions while high value transactions take place through mobile
banking.
In terms of how many people use wallets versus how many actively transact through online banking, the
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number of unique active wallet users (80-85 million) has already surpassed that of online banking users (60
million). Wallet users already more than mobile banking users and triple the number of credit card users.
This contribution comes from those users who do not use net banking but fund their wallets through credit
cards, debit cards or cash. The number of wallet users is already 3X the number of credit cards issued in the
country (24 million in 2015-16).
In the last six years ( July 2010 to Jun 2016), if we look at the growth in internet search que- ries, we‘ll see that
queries containing the word ―pay‖ grew by 18X since July 2010. This has been taken as a surrogate for the
demand for online payments. Queries regarding remitting, transferring or sending money grew by 5X in last 6
years, whereas queries for mobile wallet brands also grew by 5X since July 2010. Search queries for ―pay /
wallet / money transfer‖ grew much faster in the last year, at 3X rate, as compared to search queries for
industries like e-commerce, credit cards and insurance.
The digital payment market in India is still nascent despite concentrated activity over the past 2-3 years. The
landscape is dynamic and is rapidly evolving given changing use cases, customer propositions and business
models.
Supported by a favorable regulatory environment and coupled with a young demography eager to try and test
new digital technologies, the Indian payment industry is bound to grow multi-fold in the coming decade.
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given by many digital payment banks. This comes as boon to customers and also acts a
motivational factor to go cashless.
4. Digital record of transactions: One of the other benefits of going digital is that all
transaction records can be maintained. Customers can track each and every transaction that is
made, no matter how small the transaction amount this.
5. One stop solution for paying bills: Many digital wallets and payment apps have become a
convenient platform for paying utility bills. Be it mobile phone bills, internet or electricity
bills, all such utility bills can be paid through a single app without any hassle.
6. Helps keep black money under control: Digital transactions will help the government keep
a track of things and it will help eliminate the circulation of black money and counterfeit notes
in the long run. Apart from this, this may also give a boost to the economy as the cost of
minting currency also goes down.
7. Reduction in tax evasion and greater tax compliance: By going cashless, all data regarding
the source of income of people will be available with the government so a lot of transparency
will be introduced into the system which will reduce tax evasion and increase the government
revenues.
8. Security: In case we lose our debit /credit cards, we can easily get them blocked so the risk of
losing money is less as compared to physical currency.
9. Reduction in criminal activities: Going cashless will reduce the circulation of fake
currencies. Illegal activities like drug abuse, human trafficking etc. will be discouraged as the
mode of transaction for these activities is cash.
10. Reduce cost of Managing Cash in the Economy: Build a transactional history to enable
improved financial inclusion.
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rickshaw puller will do if he has his Aadhaar ID stolen?‖ asks Mumbai based financial trainer P.V.
Subramanyam. ―Given the tedious process and poor grievance redressal, people will have no easy
recourse if they lose money online,‖ adds Nagpal. There is no stringent legal process to deal with this
kind or scale of fraud. Add to it the mass identity theft from banks‘ or companies‘ databases and it
can turn into a financial nightmare akin to the data breach in the Indian banking system on October
2017.
2) Losing phone
Since you will be dependent on your phone for all your transactions on the move, losing it can prove
to be a double whammy. It can not only make you susceptible to identity theft, but you could also be
rendered helpless in the absence of physical cash or any other payment option. This can be especially
problematic if you are travelling abroad or in smaller towns or villages with lack of banking
infrastructure or other payment options. Another drawback is that you need to keep your phone
constantly charged. If the phone dies on you, you will be stranded, particularly if you are in the
middle of an important purchase or dealing with an emergency.
3) Difficult for tech-unsavvy
India has a low Internet penetration of 34.8%(2016), according to the Internet Live Stats, and only
26.3% of all mobile phone users have a smartphone (2015), as per Statista figures. Besides the
practical difficulty of going digital, ―a bigger block is the psychological shift. You are suddenly
jumping three generations to the digital medium,‖ says Pai. Adds Subramanyam: ―It‘s a problem for
the older people, who may suddenly find themselves locked out of their accounts if they can‘t
download an app or don‘t have cash.‖ The digital medium may prove a challenge for the tech-
unfriendly people, who will need more time to adapt or the availability of other options to conduct
transactions.
4) Overspending
While there is no denying the convenience of card or mobile wallet transactions, it could open a
spending trap for an unsuspecting population. According to behavioural finance theorists, the pain of
parting with money is felt more acutely if you use physical cash instead of a card. Hence, using cash
instead of cards or mobile wallet acts as a natural bulwark for people who find it difficult to control
their spending. Besides, a high penetration of the digital payment system is contingent on the fact that
the same amount of cash does not come back into circulation. If it does, people are more likely to
switch back to the former ease of using cash as it is a habit that they may find difficult to break.
Some payment innovations that could be relevant in the Indian context are:
1. Contact-less payments: Near-Field Communication (NFC) has not been very successful in the Indian
context on account of the high costs associated with embedding it in smartphones as well as merchant
terminals. However, other forms of contact-less payments that have worked in emerging markets like
China may be more appropriate. For example, the use of QR code technology can make point-of- sale
mobile payments convenient. Customers will just need to ash the mobile app with the QR code at
check-out, which can be read by the cashier and accordingly the amount can be debited from the
customer‘s wallet / account. Customers authorize the transaction using a simple 4-digit pin or
biometric scanners.
2. Reduced dependence on mobile internet: Even though penetration and usage of the internet on
mobiles is continuously increasing, mobile data networks in the country are still unreliable and
expensive for certain customer segments. Technologies that require only one of the two transacting
parties to have access to mobile data can significantly drive up transaction success rates and further
adoption of mobile payments.
3. Internet of Things: We expect that the Internet of Things will fuel online transactions in the next few
years. Automation and connectivity of gadgets and devices will become seamless. Customers will be
able to initiate a purchase and / or payment from any electronic gadget at their home or office. For
example, consumers could use an internet connected refrigerator at home to order groceries and pay for
it real-time using a digital payments instrument.
4. Block chain: Technologies like block chain could be used to create digital currency (like bitcoin)
making peer-to- peer digital payments seamless and secure.
5. Voice based payments: Banks and payments service providers could offer solutions that enable
customers to log in and pay through voice-based authentication. This would mean that customers no
longer need to enter a PIN or a password while shopping as the app can compare stored voice
recordings to verify each transaction through a simple voice phrase. This will allow aged and illiterate
users to easily access such services and drive acceptance / penetration further.
6. Biometric / Iris authentication through mobiles: NTT Docomo has launched smartphones with iris
recognition capability. This makes transaction facility on the phone accessible only to the primary user
of the device. The cost of adding this feature to the phone is less than INR 500 and costs are expected
to further de- crease. In the future, a significant proportion of phones could be iris enabled, making
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online authentication simpler. In summary, while the exact uptake and penetration of
differenttechnologies is unclear, it is obvious that technology will be a key disruptor and further
developments will make digital payments simpler, more convenient and easier to use.
Over the last few years, the technology landscape has been undergoing rapid changes. The advent of
technologies like block chain, machine learning, bots, cloud, crypto currencies, etc., are exploring development
of new financial technologies. The business delivery and architectural models are changing due to these
technological movements. Block chain may overhaul how financial services firms operate, migrating from
centralized to decentralized models of conducting business and operations. It may reduce the cost of various
financial activities to near zero especially where it involves third parties; financial institutions may no longer
face the millstone of operating costs due to the success of block chain based digital payments. Cloud delivery
models bring advantages such as scalability, flexibility, agility and cost savings. The area in which financial
sector is adopting cloud are card and mobile payment processing, core banking, human resources & talent
management, and infrastructure as a service etc. It is expected that cloud technologies coupled with analytics,
mobile technologies and big data, may allow financial institutions to extract real value from the data.
Improvements in algorithms and automation of financial activities may impact domains such as optimization of
business processes, removing inefficiencies from operations, enhancing fraud and risk management, changing
customer services models and application of virtual assistants instead of humans.
Another technological advancement which is making headlines in the digital payment sector is usage of Bots.
Currently, its primary use is in the area of customer services because it delivers instant communication,
optimizes costs, can be deployed across different delivery models, streamlines processes and reduces call load
of business process management centre‘s, etc. Together, these technological advancements are going to
overhaul digital payment architectures and types of financial products which may get introduced in the market.
The revolution has picked up in India with developments such as proliferation of smart phones enabling rural
consumers, introduction of zero balance account resulting in financial inclusion of larger population, Jan-Dhan
scheme to check on leakage of subsidies. This may result in usage of technology and digital payment
infrastructure by majority of the population. Hence it is critical to examine cyber threat landscape applicable
globally and in India. The current threat landscape applicable to digital payment space are such as phishing,
lack of user education, fake apps, etc., and futuristic threats may consist of attack on two-factor authentication
and misuse of emerging technologies etc. Basis this study analysis, the threat landscape for digital payment
sector ecosystem is described as follows keeping into consideration current and future technological evolutions
in the realm of digital payments.
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User Threats
-Malware/ransomware
- Phishing & social Engineering
- Fraudulent wallet Applications
- Man-in the middle attack
Platform threath
- Network provider
- Payment application provider
Current
Crime-as-service
Impersonate Organisation
Malicious Insider
Cyber Warfare/Espionage
➢ Current Threats
1. Users Threats
Malware or RansomwareUsers unaware of malware infection in their devices carry out transactions, and then
the malware is able to extract user credentials and share it with the adversaries. Leveraging their credentials,
adversaries are able to conduct fraudulent transactions and draw o user finances or deny services and may be
demand ransom for services continuation. For example, last year according to report by Kaspersky Labs, a new
malware Xafecopy Trojan was detected in India which stole money through victims‘ mobile phones and it was
cited that 40 % of this malware attacks were in India.
Phishing and social engineering are the most commonly used techniques to carry out cyber- attacks on the
end users in the digital payment space. In phishing, deceptive link is sent to the user which appears legitimate
and they are redirected to sites which belongs to cyber adversaries. The user without knowing about it transacts
on it leading to loss of their credentials. Social engineers are everywhere navigating for opportunities either via
telephonic conversations or well-crafted emails to fraud gullible users.
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The adversaries may build fraudulent wallet applications and post it on the popular market places. There had
been instances in which users transacted via illegitimate wallet applications instead of legitimate ones.
Adversaries may also introduce backdoor or rootkit in the wallet applications to redirect user funds or gain
information on user credentials to conduct frauds.
Man-in-the-middle attack. The communication layer of the transactions is vulnerable to cyber threats. In case
of non-secure network implementation, adversaries are able to eavesdrop and re a man-in- the-middle attack.
With this method they can change the data packets integrity or obtain key information to conduct frauds against
users.
NFC based attack: One of the most common concerns with NFC technology is that of eavesdropping.
Eavesdropping occurs when a third party intercepts the signal sent between two devices. For example,
adversaries might also pick up other personal information passed between two smartphones.
2. Platform Threat:
Network Provider Threats:When cyber attackers gain access to network providers‘ organizational
infrastructure, it may compromise the end IT workforce token services used by them for work related activities.
It is possible that the token information residing with the adversaries can be used to siphon of user finances or
data to which the IT workforce had access.
Adversaries may good network providers with plethora of ping or web requests which may appear as legitimate
traffic. It may lead to Denial of Services as the functioning of the digital payment instruments may deteriorate
or resulting in non-availability of the prepaid payment instruments.
Payment Application Provider threats:A typical prepaid payment instrument consists of players such as
payment application and infrastructure providers. The digital infrastructure of payment application provider
ecosystem is to be protected against cyber threats. The threat landscape applicable on payment application
provider is mentioned below.
– Denial of services
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3. Crime- as- a – server:
Organized cyber gangs may be given a bounty by the adversaries to dupe end users transacting on the digital
payment ecosystem. The gangs may originate with de ned product and services. This may lead to many
systematic organized crimes in the cyber space.
4. Impersonate Organizations:
The current phishing techniques may get scaled to creating end-to-end fake online presence of the
organizations to pro t in billions as users may fall prey to it.
Third Party: Organizations perimeters are getting blurred day-by-day, as more and more work is outsourced
to third parties. The environment of third parties can also be responsible to introduce new cyber threats into the
core operational environment.
5. Malicious Insider:
A disgruntled employee may cause havoc in an organization by stealing data, disrupting operations, inserting a
backdoor in a financial services application or infrastructure based on the role he/she performs.
Techniques such as SMS or Biometrics are being leveraged as second factor of authentication for carrying out
digital payment transactions. In future, large scale social engineering attacks may be launched to obtain OTPs
or unauthorized access into systems to steal biometrics of end users.
7. Hardware Vulnerabilities:
Unpatched vulnerabilities of numerous hardware leveraged in digital payment ecosystem may get exploited to
conduct frauds.
➢ Future Threats
With the use of advanced techniques such as machine learning and AI, adversaries are developing malwares
which can infect user devices surreptitiously in an automated way, with no human intervention.
2. Cyber Warfare/Espionage:
Nations are leveraging cyberspace as ground for cyber war; it may impact functioning of digital payment
infrastructure at large.
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Adversaries breaching organizationsIT boundaries to steal corporate or R&D secrets, resulting in cyber
espionage.
National Unique ID Ubiquity: Mandating National Unique ID linking with every services in India may
expand the user threat surface. As adversaries may get enticed to break into financial systems via National
Unique ID.
IoT Attacks: Users of digital payments are adopting wearable‘s such as smart watches to conduct commerce.
These wearable devices are vulnerable to cyber threats such as acting as botnets in which they are used to
conduct denial of services attacks without user knowledge.
Social Media Attacks: Social media integration with digital payments is getting prevalent. Users are using
their social media pro les to login into payment applications. So, compromise of social media account details or
identity theft may also result in digital payment frauds. The attack techniques of the adversaries may evolve to
avatar hijacking from current identity thefts. This may get feasible due to increase of digital footprints of the
next generation users. The adversaries may be able to clone an illegitimate digital avatar of the user in the
cyber space. Organizations may not able to distinguish between real and fake avatars of the users.
Advanced Technology Attacks: Techniques such as artificial intelligence, machine learning and deep learning
may increase complexities of cyber attacks and may automate them with minimum human intervention.
Crypto currency: Ransom demanded in crypto currencies which are untraceable may propel rise of cyber
attacks on financial services and its users, with more motivation.
With implementation of technology advancement in the products, integrating multiple services or components
which may result in mesh of IT architecture, this may result in uncovered vulnerabilities in the system leading
to cyber incidents.
2.12 CHALLENGES
1. Regulatory Compliance
All mobile payment services need to abide by the legal requirements. This entails both the financial
and consumer-based regulations. This can be a problem for new players who want to invest in a new
market.
2. Fraud Risk
This is one of the biggest reasons why most consumers are reluctant to adapt to mobile wallets.
Contactless payment presents huge unknown risk and fraud like leaked data, hacking, undetected
malware, e-wallet vulnerabilities. Making the technology secure for all consumer will aid in stopping
any potential financial breaches.
3. Low Perception
Consumers still perceive that mobile wallets do not solve anything. They are still not informed of the
benefits of using mobile wallets over using cash or credit cards. That is why most of them still use
credit cards and debit cards for online payment and buying expensive items.
4. Low Trust in Mobile Wallets
Consumers say that the idea of using mobile wallets is good but not possible. They feel that they give
up a lot of their control when using mobile wallets. A research carried out by YouGov shows that
43% of mobile users don‘t trust mobile wallets, 38% fear that if their phones get lost they might not
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be able to make any payment.
Another research related carried out by Experian concluded that 55% of consumers feel safer using
credit cards. A survey carried out by Auriemma reported that consumers who use mobile wallets will
not recommend it to their friends or family.
5. No Rewards
Unlike cards and cash-back programs, they are no rewards offered when using mobile wallets. People
using credits and cash have the opportunity of receiving discounts, rewards, and coupons. Financial
marketers seeking to boost the usage of mobile wallets should take this as an opportunity to get more
consumers.
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Chapter III
Literature Review
Government's digital push has ushered in a new era of digitalization in India. Digitalization is not just
a part of our lives anymore. It is life. How digital economy & its tool impacts society and in turn, how
society shapes those evolving tools is something that will ultimately define our future. As the digital
economy is still evolving, there are obvious questions about this new economic model that have yet to
be answered. Post demonetization in India, some wonder whether cash will become extinct while
others have doubts about digital transformation of India. Infact, many have asked whether a single
globally accepted currency will emerge. This book is an attempt to simplify all these questions,
doubts and apprehensions. The book (Journey Towards Cashless India by JayantParikshit) will
explain all the relevant fundamental concepts using real life examples as well as case studies. This
will be a useful book not only for students preparing for competitive exams like
UPSC, State PCS, Banking, MBA etc. but, for anyone who wants to understand India's challenging
journey towards a cashless economy amidst the dark clouds of black money.
The purpose of
literature review is to extract the essence of the concept related to research. The theories that are
evolved by writers and scholars are included for gaining a complete result.According to a 2015 report
by Price Water House Coopers, India‘s unbanked population was at 233 million. Even for people with
access to banking, the ability to use their debit or credit card is limited because there are only about
1.46 million points of sale which accept payments through cards. A study by Boston Consulting
Group and Google in July noted that wallet users have already surpassed the number of mobile
banking users and are three times the number of credit card users.
Sanghita Roy, Dr.Indrajit Sinha (2014) . stated that E- payment system in India, has shown
tremendous growth, but still there has lot to be done to increase its usage. Still 90% of the transactions
are cash based. Technology Acceptance Model used for the purpose of study. They found Innovation,
incentive, customer convenience and legal framework are the four factors which contribute to
strengthen the E- payment system.
E-payment systems are important mechanisms used by individual and organizations as a secured and
convenient way of making payments over the internet and at the same time a gateway to technological
advancement in the field of world economy (Slozko&Pello, 2015).
Rakesh H M &Ramya T J (2014) in their research paper titled ―A Study on Factors Influencing
Consumer Adoption of Internet Banking in India‖ tried to examine the factors that influence internet
banking adoption. It is found that internet banking is influenced by its perceived reliability, Perceived
ease of use and Perceived usefulness. In the process of internet banking services expert should
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emphasize the benefits its adoption provides and awareness can also be improved to attract
consumers‟ attention to internet banking services.
Nitsure (2014) in his paper observed that the problem being faced by developing countries like India
in the adoption of E-banking initiatives due to low dissemination of Information Technology. The
paper highlighted the problems such as security concerns, rules, regulation and management. In India
there is a major risk of the emergence of a digital split as the poor are excluded from the internet and
so from the financial system.
BalazsVinnai, general manager, Digital Channels, Misys(April 25, 2016), says that ―It is critical for
banks to consider new digital channels as part of an integrated strategy and evolve from first to
second generation digital banking: switching digital from a supporting role, to the primary sales and
communication channel for banks,‖ says Vinnai. ―Reengineering processes around the customer is not
easy, but banks must embrace digital banking to remain competitive and relevant.‖
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Chapter IV
Research Methodology
4.1 RESEARCH METHODOLOGY
This report is based on secondary data. One of the most important users of research methodology is
that it helps in identifying the problem, collecting, analyzing the required information data and
providing an alternative solution to the problem .It also helps in collecting the vital information that is
required by the top management to assist them for the better decision making both day to day decision
and critical ones.
Data Source:
Secondary Data: Journals, websites, article, research papers, Magazines.Software‘s & tools used:
MS office, Personal computer, Internet.
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4.3 RESEARCHDESIGN
―The research design is at the precise core of the scientific methodology; it can be used to answer
practical questions or to test theoretical proposition/hypothesis (Luthans;1998)
➢ In this study we have used Descriptive Research design method to answer the questions of
who (influence the study),
➢ What (is the Need of digital payments, Benefits, Drawbacks, Threats),
➢ Where (the people will attract),
➢ When (the order was started),
➢ And how (the system will work and effect the economy).
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Chapter V
Results & Conclusion
5.1 Findings
➢ Digital payments have registered robust growth in 2017-18 both in volume and value
terms.
➢ In volume terms the growth during the year 2017-18 was much higher than the trend
growth rate during the last five years (2011-16).
➢ Growth in total retail payments in value terms has been three times higher than the
trend rate of last five years.
➢ The UPI and IMPS segment in volume of transactions registered a spectacular growth
during 2017-18.UPI, despite being new product in the payment segment has shown
great adoption rate among consumer and merchants.
➢ Total card payment continued its growth momentum and exceeded the trend growth
momentum and exceeded the trend growth rate of the last five years both in volume
and value terms.
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5.2 CONCLUSION
The first step taken to digital India was the demonetization of Rs 500 and Rs 1000 notes in India. We
do understand that it will be very difficult to adapt to such changes immediately but if such instant
actions were not to be taken then India‘s economic conditions will only turn from bad to worse. Thus,
as citizens and youths of India it is in our hands to promote this magnificent India encouraged by our
PM Mr. NarendraModi who has a bright vision towards the upcoming of future India. Let us teach
our brothers and sisters of this country the benefits of E-banking, Digital India Vision etc. This step of
cashless economy is going to create ripples Big success and it will help to attain vision of ―DIGITAL
INDIA‖ ―Coming together is a beginning; keeping together is progress; Working together is success‖
Digital payments offer unique opportunities. The global trend indicates higher costumer expectations
for value added services, increased competition due to emergence of new technologies and an ever
changing regulatory escape
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5.3 RECOMMENDATIONS
● Make payment regulation independent from the function of central banking(RBI).
● Withdraw charges levied by government department on digital payments.
● Reduce custom duties on payments acceptance equipment‘s.
● The opportunity for digital payments in India is promising yet quite sizable with trends being
positive over the last two to three years.
● The seven key trends identified, we believe, will disrupt the payments space in India making it
more digital over the next five years.
● It will include inversion of the cash / non-cash ratio for payment transactions over the next
five to seven years.
● The onetime value of digital payment transactions could increase 10X by 2020 from current
levels.
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Bibliography
RESEARCH PAPERS
● www.ijcrt.org ©2018 IJCRT | Conference on Recent Innovations in Emerging Technology &
Science, April 6-7, 2018 | ISSN: 2320-2882 by JB Institute of Technology, Dehradun &
IJCRT
● IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-
7668PP 28-33.
● CASHLESS ECONOMY (DIGITAL INDIA) by srm university.
● Digital payments 2020 the making of a $500 billion ecosystem in india by BCG(the boston
consulting group)A $500 BILLIO
● International Journal of Pure and Applied Mathematics Volume 119 No. 15 2018, 1259-1267
WEBSITES
● https://www.aciworldwide.com/-/media/files/collateral/trends/transactions-2025-an-economic-
times-report-on-the-future-of-payments-in-india.pdf
● https://www.dotcominfoway.com/blog/opportunities-and-challenges-for-the-wallet-integration
● https://www2.deloitte.com/us/en/pages/financial-services/articles/infocus-payments-
trends.html
● https://learn.g2crowd.com/2019-fintech-trends
● https://learn.g2crowd.com/2019-digital-trends
● International Journal
● A Study on Digital Payments in India with Perspective of Consumer‟s Adoption
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