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I had an opportunity to catch up with Nitish Asthana of First Data who provided a fascinating account of how the fast moving payments scene in India is changing the very fabric of daily life.
As 900 million mobile phones become potential new payment instruments for the 1.2 billion population, this has a potential to transform not just consumer payments and merchant payments but e-tailing, merchant-to-merchant payments, in-store payments, transport and aspects of daily life in India.
In a country where 90% of retail payments are still in cash and plastic card payment has as yet not reached the scale of say US and UK, India could expect to see a 25-35% growth over the next few years, transforming financial services in historic ways.
As Prime Minister Modi's vision of Digital India takes shape, government incentives could drive the earlier estimate of $150b card industry over next 4 years higher by 50%, to reach $250b-$275b by 2020.
Nitish sees four major trends that are reshaping how people pay in India:
Trend 1: The move from credit to debit cards
In the past 60% card payment volumes were through credit cards and these were used more for discretionary expense. Now the trend is towards use for non-discretionary expense, as consumers use cards instead of cash. Supermarkets are adopting cards and issuers have provided a lot more debit cards.
As 170 million beneficiaries newly gain access to Aadhaar-linked bank accounts, this is changing the ratio of credit to debit card spend, as 560 million debit cards swing into use. E-tailing is growing in leaps and bounds.
Trend 2: The move to contactless payments
As new POS infrastructure rolls out, a traditional terminal cost of $150-$200 can be brought down to $25-$30 through the use of mobile POS.
Modern Retail is progressing very well growing from 5% of retail to 20% by 2020, and with the cost of contactless terminals not significantly higher, as Chip and PIN rolls out, contactless terminals are set to rapidly grow from the estimated 20,000-25,000 today.
Trend 3: The move to mobile payments
The third trend is mobile especially through mobile internet. Of the 900 million mobile phones in use, 300 million are already smartphones and this is shortly expected to grow to 500 million.
People prefer to shop on their mobile or tablets rather than using laptops or PCs. This is higher even than the US and considering how important the Indian market is, apps are being rolled out and payment systems are evolving fast. This market is expected to reach $35 million.
Trend 4: The move to RuPay
The fourth major trend has been the growth of India's local network, RuPay, similar to China UnionPay. In the past Visa and MasterCard held dominant positions in India, but issuance in the last 18 months has changed things. NPCI RuPay has issued a huge number of cards and will play a very important role going forward, as all the new bank accounts use RuPay.
I found it fascinating to understand about all this and a lot more on E-tailing, merchant-to-merchant payments and B2B services, shared in Nitish Asthana's full interview.
How do you see changes in the way people pay in India? Are there other trends you've spotted? Have you yourself changed the way you pay? Would be great to hear your thoughts!
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