Technology is increasingly becoming central to the way companies carry out their business, and this holds true particularly in payments. The primary role of technology in payments today is the enhancement of transaction experience for the customer through a fine balance between convenience and security.
By Vivek Belgavi
Transaction convenience
Changing consumer behaviour and increasing customer demand is leading to innovation in payments with financial institutions and merchants focusing on providing multiple payments options, integrating social media channels and ensuring easier and hassle-free payments:
Mobile wallets: Mobile wallet issuers are utilising social media and messaging platforms to send and receive money to make wallets even more consumer-friendly
Immediate payment system (IMPS): Another major innovation for convenient payments is IMPS, a mobile based inter-bank remittance service owned by National Payments Corporation of India (NPCI), which enables any-time and instantaneous transfer of funds to a beneficiary
National Unified USSD Platform (NUUP): Launched in November 2012 by NPCI, NUUP is a platform that allows every banking customer to access banking services with a single number across all banks, irrespective of the telecom service provider, mobile handset make or region
‘One Click’ payments: Merchants and payment gateways are increasingly looking at enhancing online user experience through ‘one-click’ payment, where an online customer just needs to confirm his intention to pay the displayed amount for his transaction to go through, without having to enter information on multiple sequential pages
Bharat Bill Payment System: The RBI has issued draft guidelines for a proposed Bharat Bill Payment System (BBPS), with an objective to provide interoperable and accessible bill payment services to customers through a network of agents, enable multiple payment modes, and provide instant confirmation of payment.
Security
A number of security-enhancing measures for payments have been implemented by banks and other service providers. The gradual conversion of all credit and debit cards as well as the merchant acquiring infrastructure to EMV chip with PIN authentication is being carried out by banks following an RBI mandate. PIN authentication provides an additional layer of security by ensuring authentication not just through what the payer has but also what only the payer knows. Two-factor authentication in the ‘Card Not Present’ environment is another one of the most significant security measures implemented by banks.
A number of banks have implemented or are in the process of implementing fraud control applications for monitoring and proactive diagnosis of fraudulent payments. In the near future, the use of end-to-end Public Key Infrastructure with digital signatures will emerge as a key security requirement for payment services. The next level of fraud control is the Enterprise Risk Engine, which will combine the functionalities of the various fraud control applications across channels used by the financial institution, and provide an integrated view of the customer using real-time transaction data.
Operational efficiency and cost reduction
Even as technology becomes more and more customer-centric, financial institutions that are able to integrate different payment channels and systems will have advantage to capture market share, benefit from the economies of scale as well as improve overall customer experience.
A Payments Hub—a unified gateway through which a financial institution’s customers can make any type of payment across channels and currencies to any payee—is increasingly emerging as one of the sustainable solutions. A well-designed and integrated Payments Hub offers multiple benefits including a single operational view of all payments, centralised risk management and unified transactional data that helps financial institutions focus on analytical solutions to improve customer experience. So, in addition to reduced costs of building and maintaining multiple payment systems, it also enhances business performance and operational efficiency for financial institutions.
The benefits of a strong tech based payment system can be summarised as overall cost reduction, revenue retention and enhancement, improvement in risk and liquidity management, enhanced customer service and increased agility.
What the future holds
Going ahead, the key to getting technology right for the payments business will be collaboration among different stakeholders, including banks, telecom operators and payment service providers. There is a need for greater collaboration between banks (which still represent the backbone of the payments system) and technology vendors, especially in specialised areas like transaction security, real-time analytics and customer relationship management.
Equally important is the role of the regulator. The RBI’s stringent two-factor authentication mandate for card-not-present transactions has come under the scanner for inconveniencing one-click transactions. A possible way for RBI to maintain the fine balance would be to remove this requirement from low-value payments, with ticket sizes of R1,000 or less.
At the same time, the RBI must be lauded for recognising the central role of technology in the evolution of payments in India. In its recent draft guidelines on Small and Payments Banks, the RBI clearly mentions the need for prospective payments banks to use technology to provide low-cost deposit and payment transactions to customers. It remains to be seen how the new entrants in the Indian banking space as well as the other players in the payments ecosystem use technology to ensure superior customer experience while at the same time maintaining low costs and efficiency of operations.
The writer is executive director—Technology Consulting, PwC India
(With inputs from Abhinav Dasgupta, Ashish Punjabi and Ashish Banerjee, Technology Consulting, PwC India)
