Digital India and the Mobile Payment Revolution

mobile-payments3

These are exciting times for India. A new government with a lot of promise has taken up the gauntlet, with national-level plans for the grassroots, the bourgeoisie and the well-heeled. A nation with a growing acceptance of experimental innovations is well on its way to becoming a force to reckon with.

PM Narendra Modi, by far the most tech-savvy of politicians that India has known, owed a large part of his electoral victory to the momentum created on the Internet and social media. The new government is perceived as stable, with industry-friendly reforms to pave the way to progress for India. The new initiative of the PM titled ‘Digital India’ is an opportunity for us to step up and transform from the symbolic Elephant to the Lion roaring in the other initiative, Make in India.

Digital India is an ambitious project with objectives like large scale financial inclusion of the rural and unbanked, easy access to payments for the common man and the reckoning of India as truly digitally progressive. With this, the government is looking at providing a one-stop shop for essential and developmental services like health, judicial services, education, government services and retail. With a PM keen on results, India should soon scale up on the ‘Ease of Conducting Business’ index, inducing foreign investment in various sectors. One can speculate that it is a dream project but nonetheless requires the enthusiasm of not just the government but the people themselves. Be it industrialists, entrepreneurs or multinational behemoths, everyone wants a slice of the Digital India pie.

This brings us to the question – what will make Digital India a roaring success? No extra points for guessing that the most obvious requirement is the Internet. But an essential prerequisite will be that the Indian people be digitally equipped. By this I mean either have a computer or a mobile phone that enables Internet connectivity. India is the second largest telecommunications market and has 929.37 million mobile phone subscribers, out of which more than 120 mn are smartphone owners. This is estimated to grow at 45%, hence proving that mobile is the way to go. An entire generation would bypass the desktop era and graduate straight into being connected through their devices.

How does one harness the potential of a country that has almost 1 billion mobile phone users and yet smartphone penetration as low as 13%? We are a humongous population with highly disparate levels of income, expenditure, saving patterns and financial evolution. Nearly 60% of India’s population doesn’t have access to financial services. This requires a strategy that is beneficial to all, most of all the lower rungs.

In order to make the PM’s vision a true success, it is the responsibility of each industry to play its part, and so it is with the payments industry. There is no denying that our efforts today are towards furthering digital payments and boosting mobile payments usage. Then what better platform to reach out to India than the Digital India project? One must keep in mind that the sole aim is to augment financial inclusion and also aid payment facilities for the newly tech-enabled. This makes it mandatory that whatever innovation or scheme that the government or industry formulates revolves around accessibility and ease of usage. The success of this project can be determined by how many of the unbanked subsequently become equipped and oriented to digital payments. One step forward is the Jan Dhan Yojna that aims at providing bank accounts to all by 2019. As long as mobile phones and bank accounts are linked to facilitate mobile payments, the acceptance of mobile payments will depend on the success of the Yojna.

As a part of this industry, I would say that digital payments play a key role in financial inclusion and the consequent success of Digital India. When one thinks of the way digital payments has transformed India one step at a time, it definitely calls for exponential participation and growth by the industry. To substantiate the potential of mobile payments, let us look at a few instances that have driven growth in the past few years.

A telecom market that is more than 90% prepaid, India is one of the few countries where one can recharge a SIM card as per his expected usage, thus incentivizing first-time users to use mobile phones and pay. Paying for one’s mobile bill or even prepaid recharges through the provider’s mobile app or Mobile Banking has driven digital payment acceptance greatly. The NREGA, though heavily criticized, can act as a useful mode of disbursement of funds and help the conversion of digital money to hard cash at the last mile.

Moving towards a cashless economy will be economically viable if these cogs are in the right place and are well-oiled. This will bring in more accountability and transparency throughout the hierarchy. Tax regimes will be more taxpayer-friendly as long-term efficiencies come into play. The collection of taxes and funds and subsequent deployment in developmental and welfare schemes will be there for all to see. Through this initiative, the government can even disburse crop and seed subsidies directly to the bank accounts of the farmer community.

Ambitious ideas like education and health services through mobile phones will be possible. Service providers can monitor health, provide diagnosis and help cure basic ailments with payments for it done online. Industries like e-tailing will benefit largely from the ideas of Digital India, where the government plans to bring the widespread Indian Postal Services into play and provide last mile delivery to far flung areas that retailers are yet not able to service. The resultant benefits will be reaped by the entire circle, where the merchant expands his reach and delivery power, postal services get a required shot in the arm and the end consumer, by then equipped to make purchases through mobile, can truly be a consumer of Digital India.

IMPS and RuPay will have key roles to play in this revolution as they are designed to function even on basic mobiles. With the advent of 4G services and further internet penetration, these schemes will ensure wider inclusion. Where countries like Africa have shot ahead of other developing nations in adoption of digital payments, India too can enable worldwide remittances or money transfers through mobile phones. The use of USSD and Mobile Banking can be harnessed for sending and receiving money across borders. M-wallets are a mushrooming product that require a push for acceptance and usage. Telcos, mobile phone manufacturers and allied industries can collaborate at this opportune time for greater innovations in the space.

PM Modi has a vision of broadband highways across India, connecting around 2.5 lac villages. With the increase of mobile usage for browsing, account creation, KYC and payment facilitation, the mobile phone or number can soon act as a unique identifier for every Indian. The dominance of the humble handset will go on to make India a powerful nation where individuals are digitally connected and financially included. Progress will literally be in the hands of the people and that is how India will be truly become an information superpower.

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“Thinking Aloud” reflects the emerging trends and varied outlook of the rapidly evolving internet and communication sector. An IAMAI publication, this is a part of the market education initiative of the association.


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