India’s Evolving Banking Technologies – Payments

This is the third part of a multi-part series demystifying the recent developments and trends in the banking and financial services sector. Find a link to the second part here: India’s Evolving Banking Technologies – P2P and Crowdfunding

Transactions are one of the most important functions within the society. We have numerous transactions on a daily basis. Some can be completed by simply thanking the counterpart and some require a corresponding transfer. In today’s world, these transfers are predominantly monetary in nature. These transactions vary in their amounts – they could vary from a cup of tea worth 10 rupees to a property worth hundreds of crores. There have been some critical innovations facilitating small transactions as well as larger transactions.

eWallets
For a long time, payment modes such as cheques, credit cards, debit cards, electronic payment modes (NEFT, RTGS, etc.) were the only methods of payment apart from cash. Lately, electronic wallets have emerged as the most convenient way of making payments.
They are prepaid payment instruments where the transactions between two parties in that ecosystem can take place directly. Payments can be made by accessing the application or website through a phone or computer and transferring the money to the account of the chosen individual.
India has witnessed the emergence of bank (State Bank Buddy, Citi MasterPass, ICICI Pockets) and non-bank (PayTM, Mobikwik, Oxigen, Citrus Pay, etc.) payment wallets. With banks realizing the potential of this service, they were quick to move into this space to minimize the risk of undergoing commodification.
Many of these players are integrating their services with social media features as well to widen their base. An example of this is WeChat in China and PayTM within India. The next frontier in this market is enabling payments across multiple platforms such as Paytm to Mobikwik or Oxigen.
What has enabled this revolution is the adoption of mobile phones and the use of QR or Quick Response Codes, the prevalence of which is discussed in the following section.

QR Codes
A QR code is a two-dimensional, black and white barcode that stores data in a codified format. The content of the code can be decoded by scanning the image. QR codes is the technology that has enabled the ‘Scan and Pay’ option. QR codes were developed in Japan as a faster alternative to barcodes. WeChat introduced QR codes in 2012 to exchange contact information in China. As the applications and market demand kept expanding, QR codes facilitated this financial revolution in China. PayTM was one of the first wallets to provide QR codes to facilitate transactions in India.
QR codes have had an interesting history in India. Apart from wallets, card providers have also been using QR codes to make transactions easier. Last year, the Bharat QR code was launched. The NPCI describes Bharat QR as “a P2M (Person to Merchant) Mobile payment solution. This solution is mutually derived among NPCI, Visa and Mastercard payment networks. Once the BQR codes are deployed on Merchant locations, user can pay the utility bills using BQR enabled mobile banking apps without sharing any user credentials to the merchant. It is a quick method of payment.”
Bharat QR is an inter-operable payment acceptance solution that supports multiple providers such as Visa, MasterCard, Amex and RuPay cards & BHIM-UPI, developed jointly by the National Payments Corporation of India, MasterCard and Visa. This feature has widened its acceptance substantially. It is its inter-operable feature that makes it a revolutionary step. Thus far (and even now), most of the QR code based are closed systems where transactions can take place within an ecosystem and not across. With Bharat QR, a merchant can be identified by one QR code whether the payment is through MasterCard, Visa or RuPay, thus enabling digital transactions across ecosystems.

Unified Payments Interface (UPI)
The latest addition to the long list of technological innovations in the banking space is Unified Payment Interface (UPI). UPI has pushed the boundaries on remittances enabling transactions to take place seamlessly. UPI is an instant payment system built on the Immediate Payment Service (IMPS) infrastructure that allows instant transfer of money between any two accounts with one or different banks. By filling in certain basic details, it is possible to instantaneously transfer money. It was developed by NPCI and launched in 2016. Bharat Interface for Money, popularly known as BHIM, is a mobile app built on the UPI system to facilitate faster online money transfers. It combines various other technologies such as QR codes, etc.

Aadhaar Enabled Payment Systems (AEPS)
Aadhaar has made banking much more accessible and has pushed forward the agenda of financial inclusion. It is a system that checks for authentication using the Aadhaar network. In bank accounts which are ‘Aadhaar enabled’, a person can use his biometric details (thumb impression as of now) to access his or her account at a micro ATM. The Aadhaar network acts as the verification point to authenticate the transaction. The services currently provided are those similar to an ATM – cash withdrawal, deposit, balance enquiry, fund transfer, mini statement, etc. This is truly revolutionary. It allows even those with limited literacy to access their accounts in a much more convenient way while also allowing banks to ensure that their services are available in some of the most remote areas at minimal cost.

Among the several innovations brought in within the banking sector, these stand out as the most notable, and in most arenas overlap and co-function to aim at what is the first priority in banking- facilitating maximum convenience for customers.

– Contributed by Bhargav

Picture Credits: bgr.in



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