Fighting cash with digital payments – experiences are key
Recent data released by RBI show the UPI system going from strength to strength. In March 2017, the volume of transactions made via UPI rose by over 47%, with values jumping over 25%. With over 44 banks on the UPI scheme, merchants like Ola and Jet Airways recently joining the bandwagon, and with the RBI planning to add wallet schemes to it, the UPI is on its way to becoming a truly ubiquitous consumer payment mechanism.
However, the government’s ambitious vision of using it as a means to replace cash transfers requires more than just enabling ubiquity, quick transfers and low charges.
Consider similar efforts globally. Real time payment schemes will be in place in over 25 countries globally by the end of 2018 – including in major global markets like the US (with TCH/Vocalink), European Union (with SEPA) and Australia (with NPP).
Few realize that real time consumer payment schemes started way back in the 1970/80s, with Japan’s Zengin system and the Swiss SIC system. Yet, cards and alternate methods (such as PostPay) continue to dominate even today. It is the success of UK’s FAST payments scheme that has driven recent focus on real time payments. While government mandate has been key in driving flows and enabling adoption, customer experience has been a major focus.
In most cases, gains against cash have often come on the back of standout experience flows – like PingIt in the UK or iDEAL in the Netherlands or SOFORT in Europe (or AliPay/WeChat in the e-commerce world). Each of these has pushed the experience limit with their ease of use, and with their value added services.
To fight cash, radically simplifying experiences is essential.
The UPI’s virtual addressing mechanism (customer@upi or customer@bankname) is a great start. By creating a simple account addressing method for the entire banking system, it has eliminated the need for the painful account number and IFSC based flows that were prevalent before.
Future innovations will require enabling easy reconciliation at the recipient or merchant end. Imagine receiving hundreds of payments from different xyz@upi addresses during the day, without the capability to match it against your goods sold or invoices properly. Larger merchants will take the services of dedicated collection solutions, but the small merchant needs have to be addressed.
This requires rich customer and invoice information to be embedded in the payment flow. Currently, the UPI system runs on ATM-like 8583 messaging, with limited data storage potential. Global payment systems are rapidly transitioning to ISO 20022 messaging which allows richer data embeds within the payment flow.
In addition, there is need for a ‘BHIM for merchants’ solution that easily integrates with merchant POS/billing systems to enable reconciliations. A solution may also be to encourage card payment processors to allow UPI collects within their system.
Finally, the system needs to open up to enable value added services. Consider the ‘escrow’ mechanism that Alipay has popularized so well in China. This enables a certain amount of money to be held in a neutral store till the customer gets satisfactory delivery of this goods. Or consider the recurring micro-payments that Starbucks has popularized. Strong ways to gain an upper hand in the war against cash.
As the UPI system evolves, it needs to evolve as a platform to enable experiences. This requires a clear structure of overlay value-added services (similar to what Australia is attempting with the NPP system), where third parties can build experience enablers and offer it as a service to others in the ecosystem.
Driving adoption of new payment systems is a tough problem. Targeting it to fight the war against cash makes it doubly so. The UPI is off to a great start towards making consumer payments faster, cheaper and easier. But enabling simple, value-added experiences is key to winning the war against cash.
(Cross posted at https://www.linkedin.com/pulse/fighting-cash-digital-payments-experiences-key-vasant-viswanathan)http://vasantv.com/thoughts/digital/fighting-cash-with-digital-payments-experiences-are-key/Digitaldigital,faster payments,payments,upiRecent data released by RBI show the UPI system going from strength to strength. In March 2017, the volume of transactions made via UPI rose by over 47%, with values jumping over 25%. With over 44 banks on the UPI scheme, merchants like Ola and Jet Airways recently joining...vasantv firstname.lastname@example.orgAdministratorVasant