By James Daniels, VP and APAC Director, FIME
This year’s theme ‘Experience Everywhere’ at the Banking Frontiers’ Finnoviti & Technoviti 2020 in India reflected the growing emphasis put on the user-experience in today’s evolving payments ecosystem. Bringing together key stakeholders from across banking, fintech, payments and adjacent ecosystems, delegates discussed the modern challenges and trends of the Indian market.
Fintechs, fintechs everywhere
Exciting new fintechs were unavoidable. This is a reflection of India’s fintech market, which is one of the fastest growing in the world, set to be worth $31 billion this year.
Demonetization initiatives have helped increase bank penetration. Combine this with a population that loves mobile and a compelling customer experience, the stage is set for India’s fintech revolution. New solutions vary from digital wallets and P2P payments, to loans and billing services. The growth and appetite for innovation is staggering.
Interestingly, this influx of new players has come from India’s tech universities – not the financial world. While brimming with new ideas and tech expertise, some lack nuanced financial services knowledge. This is bringing some challenges.
On top of the need to navigate global industry regulations, India’s government and the Reserve Bank of India (RBI) have defined stringent mandates of their own. It’s important to remember that expertise does not always need to be internal. Partnerships with industry experts means fintechs don’t need to wait to get the knowledge they need. In turn, this frees up resources available to focus on innovation and time to market.
Plotting a path to financial inclusion
Financial inclusion remains a key priority, informing both bank and government strategies. One government initiative gaining traction is the National Common Mobility Card (NCMC) program. The initiative facilitates a seamless consumer experience across payments, transit ticketing and mobility services. Conceived by the Ministry of Housing and Urban Affairs at the Government of India, it aims to offer growing urban populations a seamless, multimodal travel card solution. This complements ongoing payments infrastructure migration to EMV®.
These onboarding efforts are also helping merchants accept new ways to pay too – something vital as digital payments look set to overtake cash by 2022. Software-based mobile POS (SoftPOS) solutions were prominent at the event and are increasingly popular among small merchants. These solutions use the NFC functionality of commercial off-the-shelf mobile devices to accept contactless card or mobile payments. This helps merchants to accept digital payments at a low cost and time investment.
All roads lead to open banking
While not an exclusively open banking event, the topic seemed to permeate many of the show’s discussions. As happened in Europe, the undefined role of fintechs and the rising demand for more valuable consumer services is pushing the adoption of open APIs to the top of the agenda.
While some banks are making progress in defining their own APIs, progress is limited. The lack of mandates or standardized requirements is often cited as the source of much of the delay, putting the pressure on banks to ensure the functionality, quality and security of solutions before going live.
Although it’s uncertain how India’s open banking ecosystem will evolve, many are looking to learnings from Europe. Much can be learned from open API standardization efforts such as STET and the Berlin Group. And from these efforts, Indian stakeholders can now rely on innovation tools that are tried and tested.
Real-time, real talk
Closely tied to open banking is the industry-wide push for ‘real-time’ or ‘instant’ payments. Once seen as separate topics, both are increasingly considered in tandem as part of the fundamental modernization efforts of banks that are “changing customers’ relationships with their banks and the usage of financial services generally.” In the real-time game, India is already ahead with its Unified Payments Interface (UPI).
Built on the increasingly pertinent global financial services messaging standards, ISO 20022, UPI is an inter-bank platform that merges various banking services and features, facilitating a variety of ‘real-time’ payment services. And it’s a successful initiative too, with 1.3 billion transactions in February 2020 alone.
The combination of a successful ‘real-time’ payments platform with truly open APIs could be phenomenal. So much innovation in payments and financial services is coming out of India. I look forward to seeing how it transforms and leads these initiatives, both domestically and on the global stage.