121010_Mobile Banking & Payments for Emerging Asia Summit 2012_Enabling mobile payments growth and the payments eco-system
………. The INDIA Story
1.3 Billion population, 2nd most populous nation in the world 11th largest economy in the world. Average growth rate of 8.5% in the preceding 8 years. Only 100 k ATMs predominantly located in urban areas Solution : Reach the unbanked 55 % of India is unbankedpopulation using mobile but India has 900 million mobile phones through theUnorganized Merchants subscribers. & Retail touch points. 10 million + unorganized merchants
TOTAL MARKET FOR PAYMENTS :$700 billion Fraud & Black MoneyTransactions In India By Circulation Value (2011-12) Huge Cost Inefficiencies (handling 49 6% (Printing & billion mutilation of currency currency ) notes) Cash Payments Card Payments 94% PROBLEMS Source-AT Kearney
MOBILE PAYMENT : Process & Definitions Communication Channels SMS/USSD/WAP/Mobile Applications KYC UID Service Payment Payment Payment PaymentRegistration Request Authorization Confirmation Report IMPSMobile Payments are defined as transactions executed over a mobile phone. The steps forenabling & executing a mobile payment are:Enrolment and Activation of the payment instrument with the financial institution or payment provider .Payment Request which includes transaction value and timing as parameters & initiated by customer ormerchant.Authorization & Authentication by consumer the payment before it is processed.Confirmation of the payment outcome is provided to the consumer.Review by the consumer the payment that took place, at some point in the future.Source: Mobile Payments Whitepaper Microsoft
India launched mobile telephony services in 1995. Mobile Payments - RECENT PHENOMENON - Led by Banks, Wallet solution providers & Telcos. Primary Use Case of mobile payments - Urban subscribers - Utility bill payments ticketing, Mobile & DTH recharges. Rural-banking services As the Rural mobile penetration improves -Mobile phone becomes a tool to bring the UNBANKED 600 million population under Financial Inclusion.
REGULATION •Setting up of NPCI • UID cards •Easing of RBI norms & guidelinesCOMPETITION•Many banks along CUSTOMERSwith telcos / wallet •Urban-Conveniencesolution providers •Rural-Accessibilityhave jumped into thismarket. INNOVATION •Smart Cards •Mobile wallets •NFC 6
MOBILE PAYMENTS :Current Trend STAKEHOLER USE CASE POTENTIAL IN INDIA CURRENT USAGE(%) Biller Utility Payment Medium 3 People (P2P) Domestic & International Very High 2 RemittancesService Providers Mobile/DTH recharges , Very High 90 ticketing Retailers Merchant Low 5 Payments/Shopping Mobile Transactions Value Mobile Transactions Volume (in INR million) 4.00 (in million) 4000 3380 3500 3.50 3.71 3000 3.00 3.44 3067 3.18 3.35 2865 3.12 2500 2.50 2.80 2346 2.84 2000 1960 2325 2.00 1500 1909 1.50 1000 Avg growth rate of 30% over Jan-July 1.00 500 Avg growth rate of 77% over Jan-July 0.50 0 0.00 Jan Feb March April May June July Jan Feb March April May June JulySource:RBI 2012 Source:RBI 2012
MOBILE PAYMENTS : Urban & Rural URBAN RURAL Mobile payments are enabled on Banking in Rural India is yet to take off. many banks such as SBI, ICICI Union BC model has managed to only reach 75 K Bank, HDFC Axis Bank Corporation villages. Very little progress on well over 565 K Bank. villages each having less than 2000 Total coverage is estimated at 400 population. million bank customer base. MOBILE WALLET will emerge as the single Assuming a 15% usage the most convenient and viable model for rural potential base is over 56 million India. and growing. But Rural Infrastructure needs to be put in Transactions are mainly limited to place to create a ‘Mobile Wallet recharges, utility payments etc. Ecosystem’ for Channelizing Savings & Remittances. Customer Base(in Million)200 160150100 75 50 13 15 23 25 0 Axis Bank Corporation HDFC Bank ICICI Bank SBI Bank UBI Bank BankSource: Bank Websites
Real Potential : Mobile Wallets Is 600 MILLION UNBANKED CUSTOMER BASE For Rural Space. The Need Of The Hour : Inclusive Payment Infrastructure. Existing Payments Infrastructure At Retail: Credit Cards Payments- Serves Only 3% Of The Merchant Universe. Migrants from rural India forms a significant part of Urban India & included in the rural count. In 2011-2012,Transactions: Prepaid Instruments - $1.1 Billion Mobile Banking - $331 Million
RURAL ECONOMY : India’s Future Growth Engine 720 million customers 70 % of Indian households RURAL resides in CONTRIBUTION villages. 35 % of mobile subscribers 70 % of DTH subscribers RURAL INTEGRATE Consumption the Share RURAL (56%) HIGHER THAN ECONOMY Consumption Share (44%) SUSTENANCE To sustain GDP growth of 8-9% the rural RURAL economy needs INCOME Addressing 42 % of total National Income
Receiving milk paymentsor purchasing cattle. Buying seeds/fertilizers & selling crops.Buying & selling farmequipment. INDIAN GDP 12
Potential: PoS : Deploy a low cost GPRS Point of Sale HUGE UNTAPPED MARKET : G2C terminals at the village grocer which will payments worth $ 40 billion & have connectivity to banks through NPCI International Remittances worth $ 28 and authentication through UID . billion is untapped in 550k unbanked villages having population less then 2000 Pos Cum ATM: This PoS terminal then population. becomes a Rural Human ATM at a perhapsChallenge PRESENT MODELS UNVIABLE: fractional cost of a regular ATM with ZERO Traditional banking infrastructure ,BC RECURRING & MAINTENANCE COST & model, Smart Card based Rural payment Eliminating the need for cash handling is not feasible in these locations. altogether by the banks. LOW COST MODEL : The ATM cost can be shared between several banks as it will save them the cost of deploying expensive terminals. Current interchange rate makes it unviable.
INDIA: Rural vs Urban ATM Density ATMs per million population PoS per million population India 75 India 419 Urban 98China China 218 1707Brazil 643 Brazil 13515 ATMs per million UK 1055 UK 17020 population USA 1345 USA 19083 Rural 16Japan 1426 Japan 24611 0 500 1000 1500 0 10000 20000 30000 0 50 100 150 200 250
Rural payment infrastructure required in 550k villages. High costs and servicing is a challenge to expand ATM network in rural. Most feasible option is a low cost GPRS PoS which becomes a Rural ATM. Will have connectivity to Introductory Phase (1995-2002) banks through NPCI and UID. Cost of PoS network will be a fraction of the normal ATM network. Funding to village retailers is an issue but possible to address.
Merchant Payment - Rupay CardMagnetic Swipe/Smart Card enabled (Supporting Cash In through Rupay/MasterCard/Visa/Amex) Aadhaar Cash Out through Aadhaar Utility Services (Recharges/Bill Pay)Connected to IMPS & Utility Service Merchant Payment providers - IMPS Cash In through IMPS Cash Out throughNFC Enabled for Tap & Go payments IMPS Merchant Payment - MasterCard/VISA
INITIATIVE FEATURES STAKEHOLDERSA New And Feature Rich Banks •It will provide for scalability in volumes, flexibility in operations, RTGS System Corporate Houses better liquidity saving features. Enterprise National Payment •Efficient mobile payments would require real time transfer of Corporation of India , funds with adequate security. Banks,A New Mobile Payments Private Wallets, Settlement Network •This would require building a national infrastructure for mobile Service Providers, payments. Consumers, Merchants.A Centralized Automated Banks, •A technology and feature-rich ACH network for bulk Clearing House (ACH) NPCI, Merchants transactions. Consumers •Very low Interchange rate at 0.75% on Rupay Cards as compared to 2.5 % charged by Visa/MasterCard Credit Cards. Merchants, Rupay Card Consumers, • This will spur the growth of debit card payments at retail Banks points. •Defining of PPIs to 3 broad categories . Private Wallets, New Policy on PPIs Service Providers, •Domestic Money Transfer permissible on all 3 categories. Consumers, Merchants
SARAL MONEY prepaid card for unbanked population linked to UID number. NO FRILLS BANK ACCOUNTS($1000) MOBILE WALLETS : 1.Utility Wallet- $200 2.Wallet With ID Documentation (KYC) -$1000
Lack of Customer Interoperability - Education & Financial Between All Stakeholders- Literacy. Banks, Telcos, Aggregators & Service Distributors . High Cost Of Devices & Poor Uniform Messaging – Connectivity. Standards Over SMS/USSD. Security- Regulatory Issues It is A Major Perceived Concern And There Is A Need To Address This With Rural (Terrain ) Access Defining International Uniform Standard Protocols.
International Remittances Government worth $ 58 Subsidies Billion & /Benefits worth $ Domestic 60 billion. RemittancesMobile /DTHrecharges ,Bill (Government to worth $ 20payments Consumer ) Billion.worth $100billion.
“ We’re the only company that owns the whole widget – the hardware, the software and the operating system. We can take full responsibility for the user experience. We can do things the other guys can’t do”. – Steve JobsThis document is the property of Oxigen Services India Private Limited & is Confidential 21