Making Payments digitally via Credit/Debit card has become extremely commonplace in India, for more than a decade now. The phenomenon has evolved in the last two years, and its credit goes to all the involved stakeholders. Collaborative efforts of Fintech companies that dished out innovative products, Governments that backed these products and Subscribers & Merchants who adopted these products, have brought in this change. For the last two years, India’s federal bank and the Reserve Bank of India (RBI) is walking hand in hand with telecom and Fintech companies and putting a new product every quarter.
Issuing payment bank license puts subscriber in the driver seat, while programs like m-Visa backed by VISA International and UPI (Unified Payment Interface) backed by NPCI puts subscriber and merchant both in the driver seat. In August 2015, M-Visa launched its pilot run in Bangalore and allowed the subscriber to pay directly to the merchant's VISA enabled Bank via QR code based payment. Visa brought on board, three private sector banks, to provide this service. In August 2016 RBI approved banks to officially launch UPI apps, thus allowing subscribers to pay merchants digitally and in a hassle free manner.
The success of the UPI belongs to its simplicity where subscriber does not have to ask for IFSC code or account number to do merchant payment instead they just have to ask for VBA(Virtual Bank Account) of the merchant. Besides, it is interbank operable, this means that a subscriber with Bank A can directly pay to a merchant & subscriber with Bank B. These two major features might boost up acceptance of payments digitally. In India, both subscriber and merchants are wary of disclosing their bank details. With the launch of VBA’s these details are now handled by technology and hence it seems that people might adopt this as a new way of payment.
Now as Banks are in the direct competition of Fintech Telecom Companies, banks also have to think like the telecom companies, and put marketing and support at the front. The success of all these programs and products depends on the awareness of the end user and low transaction costs. Huge investment for merchants and significant transaction cost in each transaction which needs to be borne by merchant has somewhere held back the exponential growth of card payments. On the contrary, wallets are booming in India in last two years, however, the span of the payments is restricted only to top-up and bill payment and is not going beyond that. VBA allows merchants to start accepting payments with minimal costs and as of now, there is no transaction cost for acceptance.
Current problem which I see for banks is uniformity among all the products. Most of the private and public sector banks have multiple mobile applications in the market for each of their operation, for example, HDFC, has different mobile application for Mobile Banking, Wallet, and UPI. Same goes for Axis bank, ICICI and SBI. If banks want to compete with Fintech companies then it is imperative to have a convergence of all these services under a single roof with a UI that all the stakeholders can understand. Also, Banks have to do a lot of marketing and train subscribers and merchants to start using the features of VBA just like the private players.
In this scenario, a solution like MobiFin seems to be the perfect bridge; as the modular architecture of MobiFin allows launching of all services under a single roof. A wallet user can link all the services like Top-up & Bill Payment, Voucher, Remittance, Stored value, Ticketing & banking in a single application. Service providers can launch location based service and push it to wallet user.