Biztech Nov 16, 2012
The rise of Internet, the success of mobile phones in terms of penetration and the availability of large unbanked population in emerging economies have created new and exciting opportunities for service providers. Sensing these opportunities, even non-traditional players such as BEAM, Pay U, Airtel, Vodafone, PayPal, Obopay, mChek, Prism among others is forcing banks and other players in the ecosystem to move quickly in order to preserve their payments revenues and take advantage of emerging payment platforms says the report released by Knowledgefaber.
These are exciting times for the payments industry in India with new methods of payment technologies being introduced .There are tremendous business opportunities emerging out of various payment technologies like prepaid, M-Payment and others in an emerging economy like India.
Knowledgefaber’s report on Payment Methods and Technologies focuses on where the Indian payments industry is heading to, which are new methods of payments being introduced in the market, existing business models, acceptance by consumers, security, regulatory aspects among others. The report highlights some of the key enablers for the Payment Technologies market:
Payment Gateway Scenario In India
Prepaid cards account for only 3 percent of the total debit cards in circulation in India. Currently, the market for prepaid cards in India is estimated to be at $7.98 billion and is growing at a rate of 40 percent each year. Payroll cards dominate the prepaid cards market with a 34 percent share, with travel cards at 19 percent, and multipurpose cards with a 27 percent market share (out of which, gift cards account for 5 percent).
Market is highly consolidated among three companies namely Axis Bank, ICICI Bank and Itz Cash Card, accounting for 73 percent of the market value in 2011. There is a huge potential for the expansion of prepaid cards market - if all government and other cash transactions are routed through prepaid cards. Current regulatory landscape favours banks but they focus more on credit and debit cards instead of prepaid cards while non-banking card issuers are constrained by regulations. With adoption across various sectors like online retailing, tourism, transit ticketing, government subsidies and a huge un-banked population, the future of the Indian prepaid cards market is likely to be positive.
M - Payments Scenario In India
The M-Payments scenario in India also holds a lot of opportunities in Indian market. With 920 million mobile subscribers (March, 2012) growing at 14 percent year-on-year & nearly 41 percent unbanked population in India, M-payments has huge potential in India. The market is estimated to grow from $86 million in 2011 to $1.15 billion in 2016 at a CAGR of 68 percent. Availability of affordable handsets, low mobile tariffs and increasing voice and data network coverage across the country will emerge as key drivers for m-payments in India. Lack of adequate banking infrastructure, low Internet and PC penetration are expected to provide further impetus to growth of M-payments market. However, trust coupled with security issues remain major hindrances to its adoption. Lack of awareness has also emerged as a major roadblock, specifically in the rural and uneducated mass of the country.
There are currently four different business models prevailing in this space namely Carrier dominance model, Bank dominated model, the collaborative model (Carriers and Telco’s together) and the fourth model (Peer-to-peer) made popular by new entrants in the payment industry like PayPal, Obopay, Mchek, etc. All these four models have their own pros and cons. The opportunity is big for all the players in the eco system, but the need of the hour is collaboration between them so that the opportunity can be profitably exploited. In the future, regulations couple with customer acceptance would drive the decision on which business model would be ultimately adopted in most of the emerging markets.
NFC Technology Scenario In India
NFC technology is still in a nascent stage in India, but the trial of transactions based on NFC technology has started to pick up in rail ticketing, retail outlets etc. Many banks, mobile network operators, vendors and independent companies are already implementing this technology and undertaking trial runs across the country. Mobile payment is increasingly being adopted by Indian consumers – it is estimated that the m-banking transactions have more than trebled to Rs 286 crores from 91 crores.
Couple this with over 900 million mobile subscribers, 240 million bank account holders (out of which, 42 percent own a mobile phone) and a booming retail market, the adoption of NFC technology is expected to propel further.
Citibank launched an extensive NFC payment system trial in the Bangalore city to gather customer insights. Results were quite favourable but small sample size and high adoption incentives might have skewed the picture. Lack of awareness, interoperability, availability of NFC-enabled devices & cost barriers pose a challenge. To make inroads in such a scenario, whole NFC payments ecosystem needs to be developed simultaneously by launching massive consumer campaigns, incentivising adoption and building infrastructure.
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