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Top 5 Payment Trends for 2017

Monday, May 15, 2017
By Deepak Chandnani

CEO, Worldline South Asia and Middle East

2016 has been so eventful for payments that all developments in 2017 will be watched closely and analyzed. Every year, payment innovations are finding more early adopters. Some of the trends we expect in 2017 are:

Wider adoption of digital payment instruments: As a result of demonetizing high currency denominations, the end of 2016 saw large scale digital payment adoption. Many new users turned to cards and methods like m-wallets and the fledgling Unified Payments Interface (UPI). Digital payments are also expected to grow because of the Rs. 200,000 cap on cash transactions, increased charges on depositing /withdrawing cash from bank branches, the extension of electronic toll collection to national and state highways and the launch of a single Bharat QR code.

Innovation in mobile-based payments: The ubiquitous mobile phone is will become an important and perhaps the predominant instrument for cashless payments. New methods like QR code-based payments, UPI, USSD and Host Card Emulation are all dependent on the cellphone. With over 200 million smartphone subscribers in India, more payment innovation is expected in this space. Payment banks are also focusing on introducing mobile-based products and solutions.

Emergence of economically efficient payment modes: As part of the massive push by the government to ensure that India becomes less cash dependent, more merchant outlets need to start offering cashless payment options. While traditional POS terminals accept magnetic stripe cards and chip cards, merchants will also seek low-cost alternatives like mobile POS, digital POS, Bharat QR code,UPI, etc. They will also want to accept payments through existing resources like mobile phones, possibly through P2P apps like BHIM.

Wider reach of payment services– The initiative to bring lakhs of new merchants into the ecosystem will sharpen the focus on merchant acquisition, especially in rural areas. Under penetrated categories like grocery stores, fair price shops, State government bodies, etc. will be the focal point to increase the penetration of card and mobile payments. We are likely to see these biometric terminals deployed in the market, though the extent will depend on the device cost and customer adoption.

Consolidation and collaboration: New players like some payments banks and small finance banks have started operations with the first steps in banking. While the consumer pie in digital payments is rapidly getting larger with rural India contributing its fair share, the market is competitive and fast moving. This could result in shakeout and consolidation between and amongst banks and non-bank payment players. Some moves along these lines have already been announced this year.

As the adoption and acceptance of more payment methods increases, necessary measures to combat fraud and risk should be in place with every new method. India is at a crucial stage where the government, banks, service providers and consumers themselves are working towards a less-cash economy. It is important that consumers place their faith in the payments system and are not deceived. Preempting security threats and ensuring consumer financial safety should be an important part of this growth trajectory.

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