5 reasons why the "Force" in Payments will awaken in 2016

As the Star Wars fans among us will know by heart, Obi-Wan Kenobi explains the Force to Luke as "an energy field created by all living things. It surrounds us, penetrates us, and binds the galaxy together."

The sunrise industry of Payments in India, has, over the past couple of years in particular, become majorly "Force-sensitive" with the industry catching very one's attention, and practically everyone in the Eco-system - be it established banks, start-ups, Unicorns, VCs or the regulator and the government actively engaged on how to drive electronic payments, and take India towards a "less cash" economy.

As the Force is harnessed, here are the big 5 trends I believe will shape the next phase of growth in Payments in India, starting 2016.

1. Mobile payments will take off to the next level. Despite more than 21 million credit cards and a whopping 550 million debit cards in the wallets and handbags of Indians today, Cash continues to hold sway, with a meagre 3% of PCE ( Personal Consumption Expenditure) being transacted by digital means and ATM usage being c10x that of use at point-of-sale. With nearly a billion mobile phones more than a quarter of which are smart, this mega-trend will contribute heavily to helping change this. As consumer's phones become their wallets, m-commerce and proximity based/contactless payments will rapidly grow in relevance and volume. With the imminent payments banks largely contemplating use mobile as thefault payment transaction device and the prospect of the operating system based wallets such as Apple Pay, Samsung Pay, Android Pay entering India, not to mention a slew of native HCE based wallet solutions being worked on by existing players, we will very shortly, have the requisite ecosystem and critical mass for large scale customer adoption. Having said this, a mere form factor shift from plastic to mobile in and by itself can engender awareness and usage, but will not suffice to change the deeply ingrained Indian customer predilection towards using cash. And that brings me to the next trend.

2. We will see more and more active encouragement from the regulator and Government for electronic payments. They are only too aware of the " cost of cash" to the Economy - which various sources have estimated as 1.5-2% of the GDP, as well as the tax loss due to the exchequer due to evasion and under-reporting. Consequently incentives for both consumers using digital means to pay ( think cheaper fuel, rail tickets, income tax benefits) and for retailers to accept electronic payments  ( a tax rebate if x% of value of transactions is accepted electronically) are being actively discussed. And a strong push towards expansion and proliferation of card acceptance is already underway - India with 1.2 million acceptance points has a long way to go. And if we throw into the mix the notion of benefits and subsidies (G to C) being done electronically - direct benefit transfer to JDY accounts for instance, that is a powerful macro trend further enhancing the virtuous cycle.

3. 11 Payments banks will commence operations in 2016. And are widely expected to unleash a slew of innovations to expand reach and financial access. The $10 bn domestic remittance segment for instance, is crying out for making this easy, universal,and cheap for the common man. While it is wholly logical to expect that not all th envisaged business models will succeed, what is tantalising is the prospect of even a few powerful innovations going viral and mainstream, and thereafter having a further cascading effect as more players - including the incumbent banking behemoths embrace these. Watch this space closely.

4. P2M ( merchant payments) and P2P (peer payments) will both grow. And to solve for making these intuitive and ubiquitous, mobile wallets will evolve. They will climb down from the discount fuelled steroids, to expanding use use cases and therefore relevance. It is almost inevitable that even as some fall by the wayside , others will become stronger by evolving from their current "closed loop" to becoming more open and interoperable. This in turn will spur more acceptance and consumer usage at online offline and peer to peer payment situations. Also to note is the possible ent of "social payments" .. You could be using your What's app of Facebook messenger or your mobile contact list to make payments.

5.Banks will mount a renewed offensive to "own the space" in payments. They are investing significantly in embracing "digital", making consumer xperiences smoother and less clunky even as they reconfigure their technology stacks to deliver their Trust and Security USP ( you are going to be hearing a lot about "tokenisation" for example, in 2016). Importantly, the landscape is becoming less about the start-up David's "disrupting" the banking Goliaths, and more about figuring out the rhythm for David and Goliath to dance together in a collaboration model. A powerful symbiotic proposition.

So there you have it. My big 5 Payments trends for 2016. And may the force be with you in the new year!