Placing mobile payments at the heart of eCommerce

Rahul Chiddarwar,  TimesofMoney

With a plethora of payment options – online, offline, debit, credit and CoD (cash on delivery), E-commerce in India is a minefield to navigate when it comes to receiving customer payments. Given the Indian penchant for touch, feel, buy – CoD was pegged as the cure-all for the reluctant Indian who wanted to pay only after he was certain about the product.

Today however, a leading wallet provider gets 40% of its customers from tier II and III cities in India – people who have never owned a credit card nor banked online but transact regularly through mobile wallets (in some cases, even through merchant wallets). This wallet provider has 20 million registered users as of March 2015. In contrast, 55 scheduled banks in India had issued a cumulative total of only 19.9 million credit cards as of October 2014.  Additionally, the growth of pre-paid cards in a country where currently cash is the predominant mode of transaction also says much about the payments ecosystem.

The adoption of multi-purpose prepaid cards is expected to grow at 40% through 2012-17.  And with big global players selling their prepaid cards through offline retail outlets in India, one can safely assume that the growth of ‘instant debit’ payment options only seems set to grow. Buying on deferred payments is not inherent to the risk averse, play safe Indian mindset.

Which is why, the market for mobile payments in the country is clearly ripe for the picking. 48% of India’s mobile internet users are under 25 – the demographic that is also the fastest adopter of new technology. The stumbling blocks arise not at user adoption then, but in the seamless integration of systems to enable ease in a user experience. Consider the banking sector – where last infrastructure updates could have happened anywhere between 2000 and 2015. The outcome is last mile drop in mobile payments. Current RBI banking guidelines mandate 2-Factor Authentication for most mobile or online payments via banks. For most Indians at the mercy of erratic cellular service, ‘timed-out transactions’ while paying online or through mobile are par for the course – and a very real obstacle to large scale adoption of the technology. This contrasts tellingly with the growth of IMPS (Immediate Payment Systems) across banking and financial services where the ‘wait time’ for payment settlement is now next to nothing.

Consider then that Federal Bank has launched Scan N Pay - making instant payments possible at merchant outlets with instant settlements. Deepika Padukone also exhorts us to use Axis Bank’s Pay and Say, merging mobile payments with now-native adoption of social media. The technology exists, but its adoption is currently at the mercy of the infrastructural ecosystem.

The development of the United Payments Interface (UPI) by the NPCI is a step in the direction of enabling payments seamlessly across interfaces. Using a single unique identifier (a mobile number or an Aadhar number) will allow users to transact without requiring bank information. This is a boon to the growing micro-finance sector and small banks who can use the NPCI infrastructure to set up their own mobile payment apps for their customers.

With just under a billion mobile connections in India, and around 65% of the 200 million odd internet users experiencing the Internet through the phone as opposed to any other device, the growth of payment apps is set to explode. In app payment methods adopted by merchants seem the next step to facilitate mobile payments for customers. Tie-ups between merchants and PSPs can only help this market grow, especially in convenience-driven ‘instant debit’ markets like India. Dunkin Donuts’ adoption of Visa Checkout in the U.S. is one example. Closer home, Uber in India solved its perennial payment bug with the adoption of a prominent wallet service, in its app.

We need to be ready for changes like these and hence our systems and our products have assimilated the best in technology, security and user experience to deliver a world class payments experience across channels and modes. We have invested in both technology and talent and are ready to service any business/enterprise for their digital payments solutions/needs.

Efficient transactions have become central to businesses and consumers. The line between commerce and mobile payments is blurring - so much so that eCommerce players couldn’t ignore that majority sales were dominated by purchases through mobile apps, more than through websites. This was an interesting observation, one that led a leading eCommerce player, Myntra to shift to app-only mode, hoping to spur growth in the mCommerce segment. But as was evident, the sales through Myntra saw a drop after the move, since a large majority were multi-screen users. Despite this, there are reports about Flipkart also planning to go app-only mode from September. This is a blessing for mobile payments services.

Mobile commerce is now viewed as a key channel in providing flexible transaction services across a range of sectors, including retail, payments, banks, eCommerce and telcos. While the move to App-only seemed valid in view of Goldman Sachs’ recent report that projected a 15-fold growth in the eCommerce market, there were many factors that could have contributed to the move. The M-Commerce market alone in India was US$ 2.5 billion in 2014.  With the rapid growth of E- (and M) commerce, solving the payment quandary will allow a quantum leap ahead for the digital commerce economy.

An efficient mobile payments system is one such factor that would better enable merchants to deliver the unified online shopping experience consumers seek. These include innovation through mobile payment technologies, ease of transactions and, perhaps most importantly in the Indian context, security which will drive growth in the mobile payments category. And critical to success will be enabling convenience and trust. Stringent KYC (Know Your Customer) norms currently make it tedious to adopt any e-payment instrument. For mobile payments to be the next stage growth driver for e-commerce, while technology may be sorted, the environment (both infrastructure and regulatory) needs to follow.