Fintech Revolution in India

Fintech Revolution in India:

Last 8 years have seen a big shift in the way people pay for purchases across India. What was primarily a cash economy has converted mostly digital. And I would say that the biggest credit for this goes to Paytm and #upi for being the game changers to the Indian Digital Payments Ecosystem.

What PayPal did to online payments in 2000, PayTM did the same 15 years later to offline payments.

Today, I can imagine going out shopping without my wallet in India(and I have done this many times)? but I can't do that in the US or UK. This is what shows the progress we have made on Financial front in India.

The Beginning:?

Freebies and Cashbacks: When PayTM was giving cashbacks for every purchase, we all thought that people use PayTM just for cashbacks, but what it has done is changes the habits completely across consumers. And there had to be some incentive to change the behaviours for the mass public and break the inertia and PayTM got it right by using cashbacks as incentives which clicked well with the public and then they all got accustomed to it.

Then came Demonetisation: Demonetisation in 2016 accelerated the growth of digital payments adoption across India when people were scrambling to get cash.?

PayTM brought the QR code for payments at millions of outlets and small vendors across India. This technology was further enhanced by BharatQR by getting a single QR code across all the payment solutions with interoperability across all the providers. As of today most of the Big Outlets, Small shops and street vendors can’t survive without having a QR code at their outlet. This also helps reducing the black money cash transactions from the system.

Continuous Enhancements: PayTM did not stop at the QR code but kept innovating for fixing the market needs. One of those innovations was the Sound Box. When merchants were facing challenges to ensure that payments were actually received, PayTM came up with the Vernacular Sound Box which tells the merchant “PayTM par 100 rupaaye praapt hue” and reduces the friction with the customer at the time of payment.

Challenges ahead:

Reliability of UPI System: UPI depends on banks at each side for the money transfer and these banks don’t have a very reliable and scalable technology at their end, which results in UPI payments ending up in Zombie state for hours and this results in Payment Success Rate(PSR) to be around 80-90% range. We need to ensure that PSR goes to 99%+ to build more confidence in this technology.

Monetization through the UPI/Digital payments for sustenance of Digital Payments companies: As the UPI payments are free for both Merchants and Consumers, maintaining? the UPI infrastructure and building robust infrastructure can be a challenge. Most of the UPI players(PayTM, PhonePe and #gpay ) are trying to monetise through Value Added Services(VAS) like Lending, Insurance etc. using the data they have for their customers. But VAS will have a limitation on the opportunity as there are so many players in these markets already including the banks. I feel the government should allow these UPI players to add some minimal cost to the Merchants for the UPI transactions(maybe <0.5%) to help improve the infrastructure and long term innovation for these payment solutions.

#digitalpayments #upi #paytm #gpay #innovation #fintech #phonepe

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