By Radhakrishna Venketeshwaran
In late 2016, when India moved to curb its cash-driven economy through the infamous demonetisation of bank notes, it also paved the way towards digitalisation for the entire nation. The inexorable move promoted by the government’s push towards its adoption and a synergy between tech companies and financial service providers further helped with the switch. This fundamental change in the payments industry is enabled by the rapid adoption of payment tech by retailers and a greenfield of over a billion consumers. Mobile commerce is the dominant factor in this trend, already accounting for 48 percent of digital commerce sales and forecasted to reach 70 percent by 2022.
As mobile technology evolves, more and more consumers are expected to use alternate payment methods to shop. Retailers across verticals will need to be equipped to accept newer payment technologies while facing the difficult problem of bridging the gap between emerging mobile payment trends and meeting consumers’ expectations at the point of sale (POS). As technology evolves, competition amongst fintech players will also advance; while user interface will still have some weightage, it is enhancing user experience that will yield higher user engagement. Technologies like 5G and big data will help customers with not only their preferences and decoding their needs, but also helping retailers gauge their trust.
Here are four major technological drivers in the emerging payments space that will drive the financial sector-
• Big Data – Big data is one of the most used buzzwords in the fintech sector and is often used to denote a large, diverse, and complex set of data. From solving an intricate range of business problems to adapting technological advances, the fintech sector is highly data intensive. Proliferation of big data has made the process of converting data into meaningful insights seamless and delivering a personalised customer experience possible. Responding to even the tiniest query raised by a consumer is a game changer and data mining technologies enable this real-time while serving tailored content to engage consumers when they explore a retailer’s website or online store. For businesses, using big data can give a considerable push to their company in terms of profits, acquiring and retaining customers, improved targeting and risk reduction. Big data can also help companies keep-up with regulatory requirements and scrutinise transactions for money laundering and fraud. Some of these processes are still conducted manually, and if these processes are replaced by big data analytics tools, it can help businesses increase agility and balance overall cost.
• Building a mobile payment platform – Financial and non-financial institutions can leverage digital wallets and mobile payments to facilitate new ways to pay and get paid. By building a mobile platform for one’s business, one can yield higher revenue through new customer spend, harness the potential of digital wallets and power mobile payments in-store. To increase engagement and customer appeal, digital wallet/mobile app solutions can seamlessly transfer stored value through code-based payment in-store. Integrating a mobile payment solution can help businesses expand their reach and create omnichannel access by connecting mobile customers with in-store code-based payments. Building such platforms will also help in empowering cash-in and checkout for the digital savvy and cash-preferred customer. For retailers, it will increase brand visibility, traffic and sales and help them reduce payment friction.
• 5G technology – With mobile usage in India accelerating at a rapid pace, consumers from tier-2 and tier-3 markets are also seeking services to match the evolving technologies in their mobile devices. By the end of this year, India is expected to implement 5G networks to accelerate its “Digital India” and “Make in India” initiatives, along with the ambition to be at par with its global counterparts. The implementation of 5G will push the existing operating financial models to employ disruptive technology in their business. While consumers will experience this technology with speed, connectivity to millions of smartphones and AI-driven devices, they are yet to unveil the full potential of 5G when it comes to enhancing their banking experience. Therefore, 5G will enable higher productivity with connected devices and will also champion superior, customised and digital financial experience in the coming years.
• Mixed Reality (MR)– MR technologies are a combination of characteristics of virtual reality (VR) and augmented reality (AR); it can blend the digital and physical worlds seamlessly. The combination of real and virtual worlds allows consumers to move within and communicate with both worlds simultaneously. While its popularity is prevalent in video games and the entertainment industry, retailers have already started implementing MR-driven technologies in the fintech sector. Their potential applications include consumers using MR to visualise their merchandise before they make a purchase, e.g. trying on a dress or test-driving a car virtually before purchasing. While 5G will facilitate these emerging technologies to scale up to enterprise-level, its impact has truly begun to disrupt many industries, including finance.
In India, the historical reliance on physical currency may hinder its move to a digital economy to an extent, but adoption of traditional payment methods are nonetheless expected to grow because of their ability to retain anonymity. Additionally, the ongoing pandemic has changed the course of the payment ecosystem with contactless payments becoming the new norm. The crisis could eventually end up helping the industry to accelerate the rush to digitisation. There is an opportunity now more than ever for fintech innovation to be mobile-first and couple the attractive appeal of mobile payments with global consumer demands for on-the-go access. Substituting electronic payments may largely become acceptable for even micropayments soon, a trend that will likely be structural and permanent
