The payments landscape in emerging markets, including India,is expected to transform on the backbone of accelerating growth in electronic payments given the advent of new and disruptive market players and alternative business models.
The growth of economic power within the emerging markets and their potential to leapfrog developments in mature markets will aid the creation of a state-of-the-art payments ecosystem, which will set the pace for markets worldwide.
The key factors shaping this transformation will be the impact of technology, shifting customer expectations, changing global demographics, the rise of e-commerce, and the growing regulatory supervision.The transformation will also be characterized by convergence across markets focusing on products and solutions and by technology and business/ operating models linked to payments, which will be global in nature and reach.
PwC’s report “Emerging Markets – Driving the Payments Transformation” looks at the dynamic nature of emerging markets, especially payments, which creates challenges that have never confronted the developed world, but also opens up opportunities for innovation and growth.
Vivek Belgavi, FinTech Leader, PwC India said,“Given the underlying infrastructural issues in emerging markets, there needs to be a focus on developing the infrastructure both for issuing and acceptance of payments products and instruments. Alternate payment instruments and modes like mobile wallets, virtual cards and accounts, social media and contactless payments are gaining traction for specific use cases, especially the unbanked customer base, driven by technology, customer needs and declining margin.”
In India, the new payments banks (who cannot lend but can borrow up to a limit) are expected to start operations in 2016. Since the focus of these banks will be solely on transactions, they will look at providing seamless transaction options for payments such as utility bills, mobile bills, and school or college fees, either electronically or through the banking touch points created by these players.
At the core of this change will be technology, which in addition to maintaining current standards of reliability, is expected to also reduce transaction times, improve security, increase acceptance channels (especially physical), and – in the case of merchants – lower transaction costs. Leveraging enabling infrastructure and standards such as Unified Payment Interface (UPI) and Bharat Bill Payment System (BBPS) would be critical for success.
Hugh Harley, Financial Services Leader for Emerging Markets, PwC stated “Given the large unbanked population and the growing regulatory agenda to engage these people into the financial system, emerging markets are in a unique position to drive growth in the payments industry.” He further mentions that “FinTech companies can work as a catalyst in the growth story,enabling these new platforms to be leveraged for the benefit of the wider populations.”
Cutting-edge technology will reshape the next-generation payment systems, with both FinTechand established players driving innovation. The payments ecosystem will also be redefined by regulatory interventions, which are balancing the disruption of alternative payment service providers (PSPs) with the reliability of traditional players.