So, what’s next?

Tags: Op-ed
Digital has become a catch all word for everything good and innovative. I think the most crucial question for now is whether behind all the marketing spends and media perception, a new turn in the digital space for payments is in the offing? Over the last few years, the fintech (financial technology) space has grown by leaps and bounds. On one hand, there has been an explosion in e-commerce and app based services and on the other hand banks have pushed digitisation through their own apps and growing UPI (United Payments Interface) integration.

The unicorns in this surge have been mobile wallet companies. Pushed by massive ad spends and cashback offers they have garnered huge market share. Fintech companies find themselves sitting pretty especially since the recent demonetisation of Rs 500 and Rs 1,000 notes. It’s as if all the stars have aligned at just the right time for this industry. Transactions on mobile wallets have reportedly doubled and there seems to be no stopping the upward trend for businesses in the digital-cashless space.

“What next?” Where does the fintech space turn next in terms of innovation and growth? In a market that is evolving at such a fast pace, finding the next milestone is easier said than done.

Mobile wallets as they exist, are a lot like waystations for users’ money. Wallet companies have tried to gain users by offering cashbacks, discounts and marketplace experiences. The clear advantage for such mobile-first technologies is that they keep a greater portion of the transactions’ process within a user's control. While this is a definite advance in the digital payments story, it does not go far enough.

I think the next big leap will be in re-imagining what mobile wallets are and what they can do. For instance, pick up a salaried professional’s wallet and there are likely to be at least one and most likely more than one debit/credit cards, loyalty cards and other such plastic instruments. If the wallet is to move to mobile, should all its contents move there too? I have no doubt that the future lies in the mobile-digital space and even in terms of just mobile wallets, we are yet to exhaust much of the potential for innovation. Wouldn’t the logical next step would be to integrate all these instruments and their benefits into one product?

Transformative ideas like the Unified Payments Interface (UPI) are pushing banks to take the mobile space seriously. Smartphone shipments touched 100 million last year itself, and while this number is massive this reflects a meagre 30 per cent of the population. Banks are uniquely positioned to lead the mobile and digital payments space because of their nodal function in the wider economy. Mobile banking apps for big players have notched up millions of downloads. This is a good base to build upon, and with their huge capital reserves banks could channel this into innovation. Unfortunately, they have lagged behind on innovation and this has to do mainly with their size. Change tends to be painfully slow for these big players to implement, Innovation in the financial tech space will have to come from smaller nimbler players.

Marrying the benefits of a physical card and of the digital payments model will add multiple layers of security and also the ability to manage multiple cards from a single platform. This would make the flow of money between various accounts and payment interfaces seamless. With Zeta our effort has been to go a step further, all PINs and OTPs that are generated to validate transactions are only accessible within our app. The worldwide breaches of data and security in the recent past point to how crucial this issue is.

Early movers have already come in with what we could call Digital Card based payment solutions. In effect, physical cards have been virtualised, so that a user could use it across the current card payment network. This still leaves open the option to use a physical card for backward integration, but I have little doubt that bulky card filled wallet will soon be a thing of the past. As of now, this fledgling industry is making a steady move in a new direction, but exciting new ideas are in the air and I think this is what will change the payments landscape in the coming years.

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