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On digital india

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A detailed rundown on the after effects of demonetization and the accelerated path to Digital India

Published in: Economy & Finance
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On digital india

  1. 1. # Digital India Growth is Good
  2. 2. www.quatrroprocessing.com2Quatrro Confidential From Barter To Cashless
  3. 3. www.quatrroprocessing.com3Quatrro Confidential History of Money Source: Telegraph/The History Of Money, Investopedia/ Roots Of Money Barter Coins Paper Money/Cheque Electronic Payments Digital Payments
  4. 4. www.quatrroprocessing.com4Quatrro Confidential Glossary A Cashless Economy is one in which all the transactions are done using cards or digital means with the minimal circulation of physical currency. Demonetization is the act of taking away a currency unit of its status as legal tender. It is mainly used to combat inflation, to combat corruption, and to discourage a cash system. A Digital Wallet refers to an electronic device that allows an individual to make electronic transactions without using debit or credit cards. Cashless Economy Demonetization Digital Wallet Digital payment refers to a system that facilitates the acceptance of electronic payment for online transactions. Common digital payments instruments include debit/credit cards, digital wallets, NEFT, wire transfers, and others. (UPI) Unified Payments Interface is a payment system that allows money transfer between any two bank accounts by using a smartphone without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords. USSD (Unstructured Supplementary Service Data) helps with mobile financial services (MFS) with communication between customers and their mobile payments platform. It is currently the best technology available to provide MFS to low- income individuals. Digital Payment UPI USSD Source: Wikipedia
  5. 5. www.quatrroprocessing.com5Quatrro Confidential First Off, Digital Payments Globally
  6. 6. www.quatrroprocessing.com6Quatrro Confidential Evolution Of Consumer Digital Payments Globally Source: BCG Source: The Economic Times, 2016 Market Report by Fortumo Digital Payments Are Growing Rapidly With The Changing Needs Of Consumers
  7. 7. www.quatrroprocessing.com7Quatrro Confidential The Ongoing Digital/ Technology Revolution 01 02 03 04 More Demanding Customer Expectations For Immediate Payments ‘Enabling’ Regulations Entry Of Non-traditional Players  For the first time In Year 2015, China surpassed U.K. & South Korea in non-cash transaction volumes  Cards are the fastest growing non-cash payments instrument globally since 2010 Four Seismic Shifts In The Global Landscape Source: Digital Payments 2020 Report by BCG, World Payments Report 2016 from Capgemini and BNP Pariba More Banks Are Recognizing The Need To Adopt A Digital-First Mindset To Provide Digital Offerings
  8. 8. www.quatrroprocessing.com8Quatrro Confidential Now, Digital Payments In India
  9. 9. www.quatrroprocessing.com9Quatrro Confidential Plastic Card Unstructured Supplementary Service Data Aadhaar Enabled Payment System Unified Payment Interface Mobile Wallet Modes Of Digital Payments The New Way To Pay Source: Google Search
  10. 10. www.Quatrro.com10 www.Quatrro.com10 Roadmap Of Digital Payments Products In India Quatrro Confidential Source: Nasscom Payment Report 2016 www.quatrroprocessing.com
  11. 11. www.quatrroprocessing.com11Quatrro Confidential Changing Consumer Landscape In India 2014 2016 2018 Users 22.6 Crore 32.1 Crore 41.1 Crore Penetration (% of mobile users) 18.30% 25.40% 31.70% 2014 2016 2018 Users 12.3 Crore 20.4 Crore 27.9 Crore Penetration (% of mobile users) 21.2% 29.8% 36.0% Internet Users & Their Penetration In India Smartphone Users & Their Penetration In India 83% Of Indians Don't Own A Smart Phone Indian consumers are changing at a pace far greater than that foreseen. This has been the result of several drivers, whose impact has strengthened exponentially over the years. Drivers:  Changing incomes and demographic profiles of consumers  Growing access to the internet and greatly increased use of smartphones  Growing health and environmental consciousness  Technological innovation  Rising complexity of decision –making for consumers Source: 2016 market report by Fortumo www.quatrroprocessing.com Digital Payments are creeping into our lives
  12. 12. www.Quatrro.com12 www.Quatrro.com12 Digital Payment: Triggers Of Usage Quatrro Confidential Source: www.quatrroprocessing.com Influencing Attributes That Define The Evolution In Digital Landscape
  13. 13. www.Quatrro.com13 The Face Of Digitization: Pre-Demonetization
  14. 14. www.Quatrro.com14 Cash As % Of GDP Source: Economic times Sweden 2% UK 3.36% USA 7.46%Denmark 3.38% India 12.42%
  15. 15. www.Quatrro.com15 India- Before Demonetization Source: PwC-Disrupting Cash, 2014 & RBI 50% Of The Indian Population Did Not Have Access To Credit Or Debit Card
  16. 16. www.Quatrro.com16 The Face Of Digitization: Post-Demonetization
  17. 17. www.Quatrro.com17 India- After Demonetization Need Government Merchants Providers Customer  Challenges with cash: Cost of managing cash in India is 24 Thousand Crore P.A  Tracking transaction for revenue generation is difficult  Opportunities:  Reduction in lost sales  Reduced processing time  Cost Effective:  Govt. might extend subsidy  Convenience:  24*7 availability of currency, payment transfer  Banking reach is limited  Better offers, deals & discounts  Technology  Increasing in-app payments  Mobile based financial transaction on rise  Bank  Increase number of transactions Source: Cost Of Cash In India Report
  18. 18. www.quatrroprocessing.com18Quatrro Confidential Growth Pattern After November 8th, 2016 Number Of Transactions Per Day Source: Ravi Shankar Prasad Official The Acceptance Of New Digital Payment Is A Welcome Note For The Future of Cashless Economy
  19. 19. www.quatrroprocessing.com19Quatrro Confidential RuPay, Card Usage Jumps Manifold Source: Digital India India Treads The Path Of A Cashless Economy
  20. 20. www.quatrroprocessing.com20Quatrro Confidential Inflow Of Deposit Source: Deutsche Bank Massive Deposit Bonanza For Banks
  21. 21. www.quatrroprocessing.com21Quatrro Confidential Government Plans To Move India Away From Dependence On Cash 462 573562 801 0 10 20 30 40 50 60 70 80 90 Apr'14 Apr'15 No. Of Card Transaction (In Lakh) Credit Card Debit Card 1460 870 1790 1150 0 20 40 60 80 100 120 140 160 180 200 Apr'14 Apr'15 Amount Of Card Transaction ( Crore) Credit Card Debit Card Card Payments: Is This The Saviour? Source: RBI, RBI Media Reports Demonetization Will Pace-Up Digital Payments In A Very Short Span
  22. 22. www.quatrroprocessing.com22Quatrro Confidential What Has Changed?
  23. 23. www.quatrroprocessing.com23Quatrro Confidential Moving Towards A ‘Non-Cash’ Society Source: BCG Analysis, Euromonitor Passport, 2015 92% 89% 78% 60% 41% 8% 11% 22% 40% 59% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2010 2015 2020 2025 Cash Non CashSource: BCG Analysis, Euromonitor Passport, 2015 e e Cash: 5 year CAGR 0.8% 2.5% 5.0% 7.5% 2023e 2018e: The Point Of Inflection Where Noncash Payments Will Overtake Cash 2018e 2023e: The Point Of Inflection Where Noncash Payments Will Overtake Cash
  24. 24. www.quatrroprocessing.com24Quatrro Confidential The Party Has Just Begun For Digital Wallets In India A fortnight after the government withdrew old Rs 500 and Rs 1,000 currency notes:  The number of users for Paytm surged to 1580 Lakh from 1500 Lakh The number of Mobikwik 400 Lakh from 350 Lakh respectively
  25. 25. www.quatrroprocessing.com25Quatrro Confidential s M-Wallet Explained Source: Respective Marketing Information Go to the Paytm App Paytm The New Kid On The Block
  26. 26. www.quatrroprocessing.com26Quatrro Confidential s Paytm: Payment Process Source: Respective Marketing Information
  27. 27. www.Quatrro.com27 www.Quatrro.com27 Cash-On-Delivery is dipping, eWallet Is skyrocketing Quatrro Confidential www.quatrroprocessing.com Source: Indian Retailers, Rocket Bazaar • 30% decline in cash on delivery orders post demonetization • Delivery returns climb 50% for major e-commerce marketplaces Increased by 59% after demonization Indian e-commerce growth projection cut from 75% to 55.5% In 2016
  28. 28. www.Quatrro.com28Quatrro Confidential www. quatrroprocessing.com Around The World In 60 Seconds
  29. 29. www.Quatrro.com29 www.Quatrro.com29 Leading Digital Wallets, Globally Quatrro Confidential www.quatrroprocessing.com Apple Pay Apple Pay is Apple’s proprietary digital wallet. It utilizes NFC technology and can be used in many locations that have contactless terminals. Android Pay Android Pay uses NFC technology to enable payments by tapping a phone to an NFC-enabled terminal. PayPal PayPal is best known as an internet- based digital wallet for paying for purchases from shopping websites. Paytm Paytm Wallet can be used to buy goods and avail services online & offline. It can be easily recharged via net banking and debit & credit cards. FreeCharge FreeCharge lets users recharge any prepaid mobile phone, postpaid mobile, electricity bill payments, DTH and data card in India. PayUMoney PayUMoney is an e-wallet service in India. The wallet empowers to make online payment via credit cards, debit cards, netbanking etc. Alipay Chillr lets users send money in seconds to anyone in phone book, without having to know their account number, IFSC code, or waiting for OTP. Oxigen Wallet Oxigen Wallet allows users to top-up money and use it for mobile data recharge, DTH and data card recharge. MobiKwik MobiKwik can also be used to recharge mobiles and pay bills, but it's also accepted across merchants such as BookMyShow, eBay etc.
  30. 30. www.Quatrro.com30 www.Quatrro.com30Quatrro Confidential www.quatrroprocessing.com The mWallet leaders - Alipay, M-PESA & bKash  Around 50% market share in online payments  Around 78% market share in mobile payments Source: pymnts.com  More than 100 Million Alipay wallet users have made $148 Billion worth of payments through mobile phones  Alipay processed 710 Million payment transactions  It processed 85,900 transactions per second Source: globalpaymentsummit.com  Kenyans made 4.1 Billion M-Pesa transactions in 2015  M-Pesa total transactions worth $52.6 billion in the year 2015  42% of Kenya GDP Transacted on M-PESA in 2014-15  Now Process 14 Million transactions per day  M-Pesa now stands at 21 Million customers Source: bloomberg.com, nation.co.ke  24 Million Customers Using Mobile Money  30,000 merchants accepting bKash  Monthly transaction volume has exceeded USD 7.5 Million. In June 2016, 700 organizations used mobile money
  31. 31. www.Quatrro.com31Quatrro Confidential www. quatrroprocessing.com Barriers To Digital Payment Adoption
  32. 32. www.Quatrro.com32 www.Quatrro.com32 Key Barriers To Digital Payment Adoption Quatrro Confidential Source: www.quatrroprocessing.com Complexities of Digitization
  33. 33. www.Quatrro.com33 www.Quatrro.com33Quatrro Confidential Source: Pew Research Centre, 2016 www.quatrroprocessing.com 83% Of Indians Don't Own A Smart Phone, A Prerequisite For Most Banking Apps The Smartphone Abyss In India India Still Has An Inadequate Telecom Network, Which Fails To Reach 250 Million Smartphone Users
  34. 34. www.quatrroprocessing.com34Quatrro Confidential  Processing capacity: The sudden upsurge in digital payment transactions will put a severe strain on the processing infrastructure. Strain on the processing capacity will lead to customer and merchant dissatisfaction and questions be raised on the integrity of the payments systems.  Security of IT systems: The unstructured and mostly unplanned adoption of new payment methods raises pertinent questions on the security and robustness of the IT systems on which these payment methods are being run.  Security of the Mobile Apps: In fact, Qualcomm has issued a public warning that none of the digital wallets in India are safe from a hardware security point of view.  Social Engineering: The serpentine queues at banks and ATMs has accentuated the Jugaad mindset in India. Consumers are cutting corners and adopting short cuts to beat the rush to withdraw cash. Indian consumers; like everywhere else and perhaps more, are vulnerable to sharing passwords, PINs and other secure information that compromise their accounts. What The Experts Have To Say Roadblocks On The Digital Route For India Source: Sriram's article
  35. 35. www.Quatrro.com35 July 2016 Internet banned in Kashmir during protest over the killing of Burhan Wani September 2015 Mobile data services blocked in Godhara, Gujarat, as a precautionary measure during the immersion of the Ganesh idols. August 2015 Internet services blocked for six days in Gujarat during the Patider reservation agitation March 2015 Internet and mobile data services blocked in Nagaland for two days due to a mob lynching In The Name Of Security Some Recent Bans Top 5 Countries By Numbers Of Shutdowns 22 22 8 6 3 India Iraq Syria Pakistan Turkey Internet – The Key To Cashless Transactions This entirely plausible scenario is definitely bad news for a digital economy Shutdowns From June 2015 To May 2016 22 The number of times Indian ISP’s were shut down during this period. 70.5 The number of days of internet blackout 81 Instances of internet black outs in 19 countries
  36. 36. www.Quatrro.com36 A Fact To Ponder Over NEW VULNERABILITIES Source: Brookings Institution, Boston Consulting Group While Governments Push Digital Transactions And The Potential Of The Online Economy, Internet Breakdowns Have Serious Financial Consequences
  37. 37. www.Quatrro.com37Quatrro Confidential www. quatrroprocessing.com Indian Payment Industry: Revenue Opportunity
  38. 38. www.Quatrro.com38 www.Quatrro.com38 Digital Payments: The Making Of A $500 Billion Ecosystem By 2020  Over 10 Million merchants establishments will accept digital /mobile payments  ‘Aadhaar’ Enabled Payment System (AEPS) to provide ease in banking facility to semi-urban and rural areas  Modified UPI will be a game changer The Future of Digital Payments  Contact-less payments  Internet of Things  Block Chain  Voice-based Payments  Biometric / Iris Authentication Through Mobiles Will Any Of These Take Off? Quatrro Confidential With A Transaction Fee Ranging Between 0.50 - 0.75 % (For B2B) And 2 % (For P2P), The Indian Digital Payments Industry Could Be Worth Approximately USD 5 Billion In Revenues By 2020 Source: BCG –Google digital payments India 2020:2016 www.quatrroprocessing.com 56 4 17 224 178 1 12 09  Currently G2B & G2G kept out of scope due to limited mobile update in future
  39. 39. www.quatrroprocessing.com39Quatrro Confidential Special Incentives To Encourage Digital Payments Efforts: 02 POS devices will be deployed in each of 1 Lakh villages with the population of less than 10,000 / Rural Regional Banks and Cooperative Banks to issue “Rupay kisan Cards” to 4.32 crore Kisan Credit Card holders Benefits: This will benefit farmers with the facility to transact cashlessely in their villages for agri needs Efforts: Discount of 0.75% on digital payments at Central Govt. Petroleum PSUs Benefits: This will reduce the cash requirement of nearly Rs. 2 Lakh per year at petrol pumps Efforts: Free Accidental insurance upto Rs. 10 Lakh on buying online tickets in Railways Benefits: It is expected that another 20% passengers may shift to digital payments Efforts: Discount of 0.5% for monthly or seasonal tickets on digital payments from 1st Jan 2017 on suburban railway network Benefits: As passengers will shift to digital means the cash requirement may get reduced by Rs. 1,000 crore per year in near future Efforts: No service tax on digital transaction charges/ MDR (Merchant Discount Rate) upto Rs. 2000 per transaction •10% discount for toll payment on National Highways using RFID card/ Fast Tags in 2016-17 Efforts: Public sector banks advised to not charge more than Rs. 100 per month as rental for POS terminals/ Micro ATMs/ mobile POS from merchants Benefits: Nearly 6.5 Lakh machines by Public Sector Banks have been issued to merchants • With lower rentals, more merchants will install such machines and promote digital transactions
  40. 40. www.quatrroprocessing.com40Quatrro Confidential www.Quatrro.com40 Indian Payment Industry: Revenue Opportunity Quatrro Confidential Unified Payments Interface (UPI) Aadhar Card Verification Block Chains Internet Of Things Contactless Payment Digital Wallet / M-Payment/ P2M payment Voice Based Payments Biometrics Growth Source: BCG –Google digital payments India 2020:2016 www.quatrroprocessing.com Digital Payments Industry To Generate Revenue Of $5 Billion By 2020
  41. 41. www.quatrroprocessing.com41Quatrro Confidential www.Quatrro.com41 Digital Payment Channels Now In India Quatrro Confidential www.quatrroprocessing.com
  42. 42. www.quatrroprocessing.com42Quatrro Confidential www.Quatrro.com42 NPCI (National Payment Corporation Of India) The Payment Ecosystem Of India Quatrro Confidential www.quatrroprocessing.com
  43. 43. www.quatrroprocessing.com43Quatrro Confidential Thank You! Sriram Natarajan Chief Operating Officer Quatrro Processing Services Email: sriram.n@quatrro.com Website: www.quatrroprocessing.com

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