Cash Out

India Is Going All-In on the Digital Payment Gold Rush


“The digitization has and will continue to change social trends and alter consumer behavior and demands.”

—Ravi Venkatesan, Bank of Baroda, Mumbai, India



Money doesn't just vanish. And yet, in November, India's 1.3 billion people saw 86 percent of the country's cash go out of circulation overnight after the government eliminated existing 500- and 1,000-rupee banknotes.

The move was part of an ongoing national effort to eliminate corruption by shifting to digital payment systems, and it spurred rapid changes. By December, India was seeing 1 million new mobile wallet users each day. Banks, startups and global firms have since launched dozens of apps and payment services, many tied to shopping, transportation networks, and debit and credit cards. Even small vendors—from corner grocers to rickshaw operators—have begun accepting digital payments. “The digitization has and will continue to change social trends and alter consumer behavior and demands,” says Ravi Venkatesan, chairman of Bank of Baroda, Mumbai, India.

The bank has invested heavily in the digital payment marketplace, and it has plenty of competition: Indian startups such as Paytm, MobiKwik and PhonePe, and global firms such as PayPal, Amazon and WhatsApp. Paytm, for instance, has launched a project to create new financial service products related to deposits, wealth management, insurance and lending in a push to acquire 500 million new customers. Rapid digitization could allow India to leapfrog the need for widespread credit card or check payment systems, according to David J. Reibstein, a marketing professor at the University of Pennsylvania, Philadelphia, Pennsylvania, USA. “Rather than develop a soon-to-be-outdated technology, it's logical to transition immediately to the next form of payment.”

For organizations to capitalize on the new digital gold rush, they'll have to navigate myriad regulations and rules while also engaging the general Indian population, which has been largely shut out from financial services—until now.

Mobile wallets and digital payment systems are bringing new services to “many people quite distant from financial centers who haven't had access to financial products and services before,” says Gilles Ubaghs, principal analyst, Ovum, Toronto, Ontario, Canada. Managing these stakeholders’ expectations is vital to project success: Big challenges for teams include attracting and retaining users, deciding which market segments to target, and rolling out an app and related services smoothly. Mr. Ubaghs says that organizations competing in India must also wrestle with strict payment regulations.


Digital payments in India have even spread to auto rickshaws.


For its part, Bank of Baroda has created nine mobile apps covering traditional banking terrain like checking and bill-paying, but also merchant payment and peer-to-peer transactions. The app projects also handled cutting-edge requirements such as QR codes for mobile payments, cardless ATM withdrawals and audio-based payment processes, Mr. Venkatesan says. (For the latter system, a mobile device emits an encrypted sound that initiates payment between the app and a point-of-sale terminal.)

The success of mobile payment projects at Bank of Baroda depends on three things in particular, he says. First, there's a focus on flexibility so that a project can change scope and direction if necessary. Teams employ agile approaches, focusing on fast iterations, frequent updates and a collaborative approach between developers and business teams.

Second, “since most mobile payment systems involve a value transfer, planning assumes an even greater role to cover the security and vulnerability modules in detail,” he says. Security requirements may include customers taking more steps, such as checking PINs, biometrics and one-time password verifications. “Individual customer preferences may differ as well,” Mr. Venkatesan says. “For instance, some customers place greater emphasis on increased security and are willing to sacrifice ease of access, while others place an emphasis on easy navigation.”

That dynamic leads to the final need: thorough testing. “A lack of testing leads to customer dissatisfaction and may result in high customer churn,” he says.

Delivery speed matters as well, given how fast technologies in this project space are changing. “It poses a challenge to the development team and their ability to incorporate the latest available technology in the application,” Mr. Venkatesan says. “Features must be added continuously.”

The stakes are high: Demonetization is the wave of the future, Mr. Ubaghs says. “It is already changing India, and it will change the world.”

—Samuel Greengard


“[Demonetization] is already changing India, and it will change the world.”

—Gilles Ubaghs, Ovum, Toronto, Ontario, Canada



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