In a land where almost a billion people own mobile phones, cash is still king and large swathes of the population have no formal bank account, mobile payments are quickly becoming a critical part of India’s economy.
In many ways, India’s mobile payments sector shares many of the same challenges and opportunities as its peers in any other market – mature or emerging – around the world. Privacy and security are key, as is ease of use and accessibility. Indian banks and telecoms companies, like their foreign counterparts, struggle with technology integration and customer education, and fret about merchant adoption and the impact of regulation.
But take a deeper look and you will quickly find that India’s payments market is bounding ahead and – in a number of areas – seems to be well on the road to overcoming many of the challenges that continue to plague their peers in other markets.
Mobile phone penetration is booming and – while levels have not quite reached that of some Asian or European countries – few people in either the cities or the furthest reaches of the countryside are without some level of access to a mobile phone. Banks, on the other hand, are few and far between; in fact, it is estimated that only about a quarter of all Indians have a bank account, while more than 60 percent own a mobile phone. Faced with these dynamics, it does not take long to realize that mobile payments will ultimately bring transformation to not only the payments industry, but society at large.
One of the most promising signs of India’s leadership in mobile payments comes from the high level of cooperation within the industry itself. On both the banking and the telecoms sides, we are seeing players come together and put aside their competitive differences in order to develop common standards and approaches to mobile payments. All stakeholders - banks, telecoms operators, technology providers, regulators and government organizations - have created the Mobile Payments Forum of India (MPFI), and are collaborating to address the market needs.
And while this may seem like a portent for a deep division between the telecom carriers and the banks, the reality is that both are working closely with the Reserve Bank of India (the banking regulator) and the Telecoms regulator to ensure that the industry is moving towards a level of standardization and interoperability that should allow the development of an open and interconnected mobile payment ecosystem across the country.
As a result, India has witnessed the ascendency of two initiatives that, together, are accelerating growth of the mobile payments market. Interbank Mobile Payment Service (IMPS) - a platform developed by National Payment Corporation of India is already adopted by more than fifty of India’s banks to offer instant payment and remittance services using SMS, WAP, and a range of mobile apps.
By Kunal Pande, Partner, KPMG in India