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Fin-Tech: Financial Services To Come

IGIDR Finance Research Group partnered with iSPIRT to help conduct a Fintech Session in their 6th edition of Emerging Markets Finance (EMF) Conference held at Sofitel, BKC – Mumbai. The chosen theme for the Fintech Session was “Financial Services to come”. The session was divided into two parts – (1) inform the disruptions in financial services together with the showcase of select software product companies that are offering products leveraging these disruptive influences, and (2) panel discussions to get thought leaderships on the disruptions in payments, including the role of the regulators.

Mr. Nandan Nilekani delivered the keynote address and he enthralled the audience in his inimitable style. His session started by giving insights into the influences driving the disruptions in financial services, including a real-time demo of one such influence i.e. eKYC using Aadhaar. He then took the audience on a journey of how software product companies are leveraging these influences to introduce innovative business models that would fundamentally change the way financial services are conceived and delivered, laying stress on cashless payments. Nandan, not only, laid stress on the current but also gave the audience a glimpse of the possibilities.

2015-12-18 14.10.18The keynote address was followed by sessions and demos by four select software product companies that have introduced innovative products and / or business models leveraging these influences and making the ‘new’ Fintech happen.

The second half of the Fintech session was designed as panel discussions to engage thought leaders and first movers on their perspectives of these disruptions.

The first panel discussion was on Future of payments, moderated by Sanjay Jain (Volunteer, iSpirt). The discussion was wide ranging, with Mr. A P Hota (MD and CEO, National Payments Corporation of India) providing us the perspective on the infrastructure that has been setup by the NPCI to interconnect banks, which is the basis for payments in India, and Mr. G V Nageswara Rao (MD and CEO, NSDL) on how Payment Banks will bring in technology led business models and change the way payments are done in India. Prof. Bhagwan Chowdhry (Professor, UCLA Anderson School of Management), and David Katz (Deputy Head, Global Govt. Relations at Paypal) brought an international perspective to the panel. The conversation included perspectives on how transaction costs, and the removal of friction play an important role in the growth of digital payments and the move to a cash less society.

2015-12-18 14.47.08The panel where status quo meets disruption was highly animated discussion led by Prof Phatak and with two participants from the startup/VC community – Haresh Chawla from IVFA & Sanjay Swamy from Prime Ventures – Dr Ajay Shah and Anand Bajaj, Head of Innovation at YesBank. Dr Phatak opened by stating the time is ripe for disruption and to move to a cashless and cardless world of mobile only payments. Mr Chawla was of the view that innovations will come once the cost of moving money between accounts is near zero – and the next wave of innovations will be around applications of low cost payments. Dr Shah was of the view that the regulator still needs to encourage disruptions and remains a risk to the innovation ecosystem if they stop innovations. Mr Bajaj, fresh from the signing of the MOU between YesBank and iSpirt to setup a framework for a banking app store reiterated the bank’s desire to partner with the startups as they innovate. Mr Swamy called for the need to remove some of the obstacles in on-boarding customers for electronic payment acceptance, and asked for a framework for piloting new concepts. Overall the panel raised several real issues that were actively debated – questions from the audience also echoed the fact that most of the points raised were relevant and real issues. Over the coming months we hope the banking industry will address these issues head-on and SRT the stage for India to maximize the opportunity of the new disruptive technologies from Aadhaar to biometric authentication to IMPS and the Unified Payment Interface.

2015-12-18 14.47.04This is was the first Fintech event for iSPIRT in Mumbai and it received record registrations. IGIDR FRG event organizers expressed desire to conduct a dedicated event based on the positive feedback received.

Guest Contributed by Surya Kasichainula, 3I Infotech & Volunteer for iSPIRT

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Roadmap To A Cashless Country

Denmark is well on its way if not already the first country in the world to go 100% cashless. Sweden is not far behind either and in fact may be ahead of Denmark in cashless behaviors. The governments of the two NORDIC countries are enabling and encouraging cashless mechanisms through legislations. That means, all payments towards a cup of coffee or a house will be through cards or mobile wallets. This is an amazing development in our life times as we go from touch and feel experience of money to just clicks on our digital devices.

This got me thinking if India will ever go cashless. My prediction is that at least in the foreseeable future, India will never be 100% cashless. Just one glance at the collections in temples will show how small change matters. But over the next decade we will see strong pockets of cashless transactions by use cases. A recent report showed Cash On Delivery (CoD) still reigns supreme with 55% of overall e-commerce transactions. This is a good metric to follow on how the nation is doing with regards to cashless transactions. The tipping point towards cashless would be a sharp decline in CoD mode of payment.

In most cases, the choice of CoD is just habitual and easier, fuelling the habit. The challenge for any online business is to shift the default from CoD to digital payment modes including credit cards, debit cards or mobile wallets. Businesses don’t make it any easier with more number of instances of broken credit card machines that occasionally remind you to carry cash at all times. This along with having to remember a million passwords for both offline and online transactions easily makes cash the default king even if having to run to the nearest ATM! Cash has another benefit that is hard to beat – there is no digital footprint of the source and destination. Also, there are no fees to transact in cash unlike credit cards where some party needs to bear the cost of infrastructure.

Advantage Cashless

Uber, the taxi app set the bar high in showing us how incredibly easy the customer experience can be when it all works fine. Uber asks you to pre-register your credit card with their service when you install their mobile app. Uber is one example of a superior customer experience through the use of a payment platform from Braintree.

There are three trends that give hope to rise in cashless payments. They are mobile smartphone owners, rise in payment technology platforms and consumer behavior trends.

Mobile smartphone users in India have reached 111 million and expected to exceed 200 million by 2016 according to eMarketer. Ecommerce companies are saying majority of the purchases (CoD despite) are coming from mobile. Mobile wallets are at the least occupying the mind share of users, thanks to airtel money and PayTm. I am sure the companies will have more to say about actual usage trends.

Payment platforms are making a splash thanks to Apple which pretty much reinvigorated the space with Apple Pay. Tap and Pay is a cool platform that allows buyers to simply tap their mobile phone over a NFC enabled device installed by the business. National Payments Corporation of India (NPCI) released RuPay cards which offers much lower transaction costs that helps the Indian government and businesses to reach all sections of society in its ambitious financial inclusion program. In summary, there is a lot of innovation happening in this space that will be interesting to watch on simplifying payments.

Consumer behavior trends show Gen Y and Z, people born and waking up with mobile devices will be comfortable with mobile communications, transactions and payments.

Why small to large businesses should promote cashless?

The benefits of cashless transactions to businesses are that it saves time and money that is today spent in end of day accounting, safe storage, transportation and handling.

Why government should make it easier?

The clear benefit to government is in moving towards a more white money economy and curbing black money. Of course, governments may be tempted to react to increased visibility into billions of every day micro-transactions at grocery stores, newspaper vendors etc. Increased visibility in large transactions such as buying real estate will help curb corruption and create a fair marketplace for all sections of the society.

RBI certainly would appreciate the savings from not having to mint so much money. The impact of a majority cashless economy on monetary policy is an interesting question and may be worthy of seminal research.

Society would appreciate sharp declines of bank robberies and ATM heists. (Hang on to your copy of Butch Cassidy and the Sundance Kid). However, there are risks and the biggest is the electronic fraud. There will be many attempts to hack in to the digital vaults and steal. The nature of insuring digital banks that support cashless economies needs to be reconsidered.

Why you should pay cashless?

As someone who values money, cashless allows you to track every paisa spent and received quickly and easily, thereby allowing you to make better decisions on short term, mid term and long term financial futures. Cashless also allows you the convenience of not having to worry about carrying enough cash.

Conditions that must exist before a country can go cashless

  1. The biggest condition that must exist is Trust. Trust between the parties to give and take money through digital modes; Trust with the payment platform provider that the transactions are secure; Trust in governments to honor the transactions and also safeguard user data as every transaction leaves a digital footprint.
  2. Ease of Use in cashless payments through better user experience design and a holistic customer experience. Right from easy one click logins to finding the service you are looking for, to raising issues with customer support all done through mobile apps will be the way to go. But, several of the digital banking applications are learning the hard way about the need for solid customer experience design. My consultancy Pravi Solutions offers workshops and consulting services to create the best customer experiences.The challenge is to provide a simplified experience while still working within the regulatory framework.
  3. Scalable back-end payment systems with a ready non-cash alternative in case of emergencies. There have been internet outages even in large companies in developed countries. Even in cashless countries, there have been instances of total meltdown in taking payments. There has to be very clear government mandated and honored alternatives in case of emergencies.

In summary, the road map to a cashless country is one which will ride on the mobile internet wave and as consumers start to enjoy and appreciate the ease of use of mobile apps and the convenience of not carrying cash, it will be a matter of time businesses of any size from micro to extra large will start supporting mobile payments. Governments only need to create enabling mechanisms and institutions that safeguard citizens interest in this brave new digital world.

What do you think?