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How can I pay you today?
by Ravi Shankar, Group Executive Vice President and Country Head, Direct Banking & Cash Management, Yes Bank - Thinkingaloud
September 20, 2009 - Mumbai

08.00 AM. Drive to work. Fill Petrol En-route. Pay with Credit Card
09.00 AM. Log in to bank account. New Phone Bill. Pay via Internet Banking
10.00 AM. Markets Open. Buy Stocks via E-Broker. Pay via Internet Banking
11.00 AM. Order Flower Delivery for wife. Pay with Mobile Phone
02.00 PM. Lunch at the Food Court. Pay with Pre-Paid Debit Card
04.00 PM. Settle drinks bill with buddies. Pay with E-Wallet
06.00 PM. Send money to house help in his Village. Pay via mobile phone
08.00 PM. Dinner at 5 Star hotel. Pay with Loyalty points

The Future of Money is not in Cash but in Bits and Bytes. Digital Money is has evolved in newer forms everyday- Plastic Money, Mobile Money, Internet Money –attracting millions of consumers within the last decade alone.

Anywhere, Anytime Money is the new age Mantra. Banks, Payment Companies, Internet start-ups and Telecom providers are all gearing up to bring in new payment methods.

Digital money will soon change your lifestyle. It will help you pay from wherever you are; it will help you pay with your own money, borrowed money, or barter your loyalty points for real money. It will allow you to pay in any country and carry millions on a piece of silicon.

Digital money began its evolution in India through Credit and ATM/Debit cards. Over the last 20 years this payment system has grown by great leaps and bounds. Industry estimates that during 2006 over Rs 200,000 crores worth payments were made using cards. However when one compares this to the performance of payment using Cash and Cheques, it is still an insignificant percentage. The last 2 years have seen a small but encouraging growth of e-commerce in India. With the Internet emerging as a large marketplace, online payments for services have seen a throughput of over Rs 1000 crores in 2006. It is predicted that at least for some time e-commerce volumes will grow at over 100% year on year.

The opportunity for Digital Money in India is real. Consumers are more ready today to embrace newer forms of payments as long as the payment form is secure and works as cash in the virtual world. Retailers, e-tailers and m-tailers need newer forms of payments as their business is being conducted in a newer world. So is the party ready to begin?

It’s just about starting. The success to a payments revolution will be the manner in which key stake holders i.e. the banks (who hold consumer wallets) and their regulator (Reserve Bank) are engaged in the opportunity to build a framework for newer payment systems to operate. A significant effort and investments are required to regulate, settle and provide accurate information to customers who are using newer payment systems. This requires a strong partnership approach between payment facilitators, banks and regulators. Presently most of the payment initiatives in the country are being championed from a technology perspective. There is no platform created/agreed upon for electronic payments and settlement standards. Unless there is a consensus between key stakeholders, we will see very limited successes for newer forms of payment in this country.

So how does one make this work?
Typically new age payment solution providers want to leverage the first mover advantage. So there is a rush to launch the service. There is nothing wrong with that, however one has to study how the global leaders in payment solutions such as MasterCard International and VISA International have built sustainable and universal models. Learning how these world-class organizations created standards, regulations, partnerships etc that have become universally accepted by regulators, consumers and intermediaries, is to me the starting point.

Creating a new payments system in India requires clearance from the Reserve Bank. The new payments bill that is on the anvil, articulates how the payments landscape in India may be regulated. Given this situation it may be quicker for newer payment initiatives to ride off the platforms built by VISA or MasterCard International and give consumers a new experience. Both these organizations have been supporting new ideas on their technology platforms. For the “true blue” payment innovators who wish to create a paradigm shift and address the millions of consumers who still pay by cash, there has to be an industry support forum. This forum could work with Government Agencies, Banks and various technology providers to help them cover regulatory requirements and legal hurdles. This to my mind is the starting point for addressing the payment needs of over 500 million Indians who need alternatives to cash, but have a very long wait in the existing scheme of things.


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