Trends in Payments in India – from the eyes of the leading merchant acquirer

 

Today we are with Nitish Asthana of First Data, who provides insights on the fast moving payments scene in India, at this historic stage in the move towards non-cash payments. In this exclusive interview, we touch on key changes that could transform the card industry, and discuss a broad range of topics including E-tailing, Modern Retail, POS and the advent of mobile payments. Nitish shares four major trends that are transforming the way 1.2b consumers pay, as well as creating new opportunities in merchant-to-merchant payments potentially worth over $20b.

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Thanks for taking time out from your busy schedule Nitish! As context please could you share a bit about yourself and your role at First Data?

I am the VP & Head of First Data India Ventures and have also led First Data’s merchant acquiring business in India. At First Data India ventures, we focus on venture investments in POS, e-commerce, mobile commerce and digital payments.

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First Data is the global leader in payment technology and services solutions, operating in over 70 countries with relationships with over 3,500 Financial Institutions and offers a range of services including POS, E-Commerce and mobile (on internet and POS).

In India we are one of the leading merchant acquirers, providing services to over 250,000 merchants. First Data operates through an alliance with ICICI Bank (India’s largest private sector bank), ICICI Merchant Services. Our two lines of business are Merchant Services and Issuing. We offer POS, online, mobile and merchant processing and settlement for a broad range of consumer and business payments. Our issuing platform business runs on VisionPLUS, a First Data product and powers our service to leading banks in India.

 

Nitish, from your key perspective, which market segments seem to hold the most promise?

Activity in the payments space crosses a wide range of transactions across a set of vertical and horizontal segments.

In terms of vertical segments, E-commerce and especially E-tailing (Retail Sales on the Internet) is really important for us. Travel booking on the internet is already heavily penetrated, covering almost 100% of bookings and accounting for 75%-80% of online payments but this is fast reducing to 55% as online payments for retail, telecoms, utilities, insurance and tax take off. We also talk about point-of-sale (POS) as a vertical, within which Modern Retail is progressing very well, growing from just 5% of retail to 20% by 2020.

In terms of horizontal segmentation, large merchants of the country have already progressed in electronic payment, but today we see a lot more opportunity with small stores that accept only cash.

Overall in the market today card payments is a very small market as compared to US, UK, Australia and others but we expect 25-35% growth over the next few years.

 

The overall economic trends are also looking up?

Certainly, if you look at GDP growth, positivity is back! We are looking at a 7.5% growth in GDP expected to be the highest in the world.

A bigger driver for electronic payments is that currently over 90% of retail payments are in cash. The Government vision for less-cash is expected to bring out specific exemptions. Some are likely to relate to tax incentives for merchants and consumers to pay electronically.

If that happens, what is expected to be a $150b card industry over next 4 years could be pushed 50% higher going up to $250b-$275b by 2020. This would be much higher than current estimates, and we would reach an inflection point sooner with this planned government intervention.

 

What about the progress of Aadhaar-linked bank accounts and other key enablers?

Aadhaar has been an incredible journey with millions of customers enrolled. This received a massive boost from the launch of the Pradhan Mantri Jan Dhan Yojana (Prime Minister’s Benefit Fund) launched a year ago. It has created the rails to transfer benefits from the government, for instance LPG and fertilizer subsidy. NPCI recently confirmed that over 150m bank accounts have already been linked to Aadhaar numbers. All 170m beneficiaries were to be brought under the program by June 30, 2015. Banking inclusion has been greatly enhanced.

Regarding debit card infrastructure, India now has over 560m debit cards. Credit cards have been leading in the last 25 years, but debit cards are a more recent development. 60% of payment volumes are on credit cards despite them being fewer in number. The story so far was around credit but will be around debit cards going forward. I expect the ratio to reach 75% debit to 25% credit in terms of payment volumes.

In short we have a number of key enablers working together: the Aadhaar system enrolling people into electronic id, the push to mobile banking for the unbanked, the push to bank accounts, the roll out of debit cards and new POS infrastructure.

 

Could you please explain India’s position on merchant infrastructure?

In terms of a high level snapshot on merchant acceptance infrastructure, India has about 15 million merchants of which only 1 million accept cards. This is why card payments traction is so low. The barrier to acceptance is that terminal infrastructure is expensive, at a cost of around $150 - $200 per terminal. At this level return on investment on new terminals is difficult to justify. We have focused on bringing down the cost of a terminal to $25-$30, through the use of mobile POS. When you look at the last 8-9m merchants, mobile to mobile payments without infrastructure is the way to go.

POGO1First Data has launched our Pogo solution in July 2014, deployed at smaller merchants. At current take up levels the price point is higher but merchants do not pay upfront, we recoup the cost from on-going payments.

 

Could you tell us about the new services you launched recently?

We are one of the leaders in E-Commerce payments and operate across a number of categories. To simplify customer experience we are looking to launch our revamped internet payment gateway which would also work from mobile phones. Universal payment options also cover internet banking, integration to wallets, EMI products, payment in home currency and seamless plug in to all shopping carts and a mobile optimized interface as well. We are looking to launch this in next 2-3 months.

We are also adding a number of features to our MPOS launched last year. At that level of transactions we can simplify documentation for a merchant to quickly come on board. We’re launching a product for payments and other applications such as ERP, accounting, loyalty and a hardware/software.

Essentially small sized retailers have not invested in counter top infrastructure. Some may have PCs, some may not even have that. What we want to provide is a package deal for a small player by “miniaturising” the functionality used by large merchants: ERP, bar code reader, printer and other features. We believe that addressing the needs of small merchants is of great importance.

 

How about merchant to merchant applications and do you have estimates on how much the India B2B market is worth?

If you look at B2B, that too is very interesting for us as we address cash and carry. In India the market includes stores such as Walmart and Metro Cash and Carry. We’ve done a prepaid program, also a credit card with limit, accepted by closed group of retailers. Other interesting opportunities are around travel, for low cost airlines to sell their inventory and enjoy more card acceptance. The third interesting area is procurement that can help both parties optimise working capital.

Our own best estimates for the size of the B2B market is $15b to $20b of available market across the country.

 

How has the Indian payments market changed over the last year?

The first major trend has been the move from credit to debit. In the past cards were used more for discretionary expense, now the trend is towards non-discretionary, as consumers use cards instead of cash in their wallet. Supermarkets are adopting cards and issuers have provided a lot more debit cards.

Secondly, it is contactless. We were the first to introduce contactless terminals. For small value transactions, you can now tap and go. I believe Contactless could be very important going forward.

The third trend is mobile especially through mobile internet. India has 900m mobile phones and 300m smartphones, growing to 500m. People prefer to shop on their mobile rather than using their laptops or PCs. This is higher even than the US, and considering how important the Indian market is apps are being rolled out and payment systems are evolving fast. Mobile optimised pages and plug-ins are being rolled out. We expect this market to reach $35 million.

The fourth major trend has been the growth of our local network, RuPay, similar to China UnionPay. In the past Visa and MasterCard held dominant positions in India, but issuance in the last 18 months has changed things. NPCI RuPay has issued a huge number of cards and will play a very important role as all the new bank accounts use RuPay.

 

How important will the physical card be in India?

I think plastic cards will continue to be very relevant in the near future. Mobile wallets have not been adopted as fast as hoped and have been around prepaid rather than card in store.

I believe however that the form of plastic will change though, with more Chip & PIN EMV cards being rolled out as we speak.

 

Do you have any idea of the number of contactless cards and terminals?

I’d say terminals accepting contactless cards are in the region of 20,000-25,000. Also, if you talk to top acquirers, they’re all talking of deploying a large number.

We expect pretty much all of our new deployments to be contactless this year. Over 80% of the transactions on POS are less than $30 and could qualify as contactless. Some categories would go better, for instance super-markets and transit.

 

Transport has not come up as much as it could, do you see this changing?

A number of metros are leading in the investment in tap and go. Toll is not yet integrated and as it is not interoperable it means that people cannot yet buy prepaid. With regard to Prepaid, services Mobikwik offers card payment service for Android and iOS users and now supports paying for Uber.

The form factor of cards will change, as this increasingly moves to Chip & PIN and contactless rather than magnetic stripe as the price of contactless terminals is not that much more.

 

What significant changes are likely in the way people pay in India over the near future?

We are keen to look at in particular in terms of how government participates. Deploying acceptance infrastructure and now systemic incentives will help non-cash payments to reach tipping point.

Everyone understands the cost of cash. The goal is to get people to prefer electronic payments over cash. However affinity to cash is too high and must be broken. Government incentives made available to all, including merchants, consumers, acquiring banks and others, will help to lower costs and promote adoption.

 

Nitish, thanks for sharing your insights with us. I wish you the very best for your initiatives as India continues to adopt non-cash payments at this unprecedented pace.

 


imageNitish Asthana is the VP and Head of First Data India Ventures, focused on venture investments in POS, e-commerce, mobile commerce and digital payments. He has led the merchant acquiring business for First Data- ICICI Merchant Services (ICICI MS) and had overall responsibility over ICICI MS revenue lines across the company’s POS and Ecommerce businesses, acceptance and acquiring product solutions, sales, business development and marketing.

 


LIviewport_india_2014 For more information on “Digital Money in India”, Shift Thought’s unique 360-degree coverage of the Indian payments scene, or to gain access our self-service portal with the latest knowledge on the ecosystem, initiatives, regulations and more,  just email us at contact@shifttthought.com.

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Payments systems in the US – A sleeping giant awakes

 

This weekend as we joined in wishing our American friends and family around the world a wonderful Independence Day, my thoughts turned to how Payment Systems are changing in historic ways in America, in many ways setting off a chain reaction that will transform the way we transfer value, not just in the US but world-wide.

 

The danger was that the land that introduced the first universal credit card back in 1950 had done such a good job of meeting consumer needs that it would be hard to get people to adopt new methods. It took a number of different initiatives of a decade or more to finally get this to happen.

 

Mobile Payments starts to take off at last

Did you know that mobile payments in America are expected to grow from $3.5b spent by 16 m shoppers in 2014 to a massive $27.5b by next year? Even then this will still be just a fraction of the $4.3t retail store payments made in the US. The common man or woman in America is seeing changes in the way they pay for tolls on the roads and how they pay each other, as well as pay bills and shop online.

 

Digital wallets – not there yet, but on the move

For the longest time it seemed as if this would not happen, especially after the strong push towards digital wallets in 2011 seemed to fizzle out. However now it seems this was simply the calm before the storm. Each side has reinforced itself as major battle commences to win hearts, minds and mobile wallets, but this time I believe what happens in America will not stay in America.

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The US market becomes NFC-ready

Finally this year we have seen important moves towards new forms of mobile payments vi a NFC, QR Codes, MST, BLE and more, with a reported 70% increase in mobile commerce in the US since 2012.

On the one hand US POS is finally beginning to support EMV, as the October 2015 deadline looms.  As the difference between the cost of contactless and non-contactless terminals is not vast, retail outlets are increasingly becoming NFC-ready.

 

Retailers look for online and mobile innovation

On the other hand top US Retailers have finally realised that the future of their brands depends on a golden braid of inextricably woven marketing and payments campaigns that rely on ever deeper market understanding to help get, keep and grow their customer base.

As in other countries, transport is becoming one of the first applications for consumer adoption of digital payments, as existing methods for paying get removed and replaced by new ones. Online payments are now widespread, but fear of loss of identity and security breaches still leaves a gap to be filled, causing a lot of focus on biometrics, authentication and fraud prevention. However for adoption to deepen across America the real driver will be offers and marketing campaigns.

 

Marketing  and Payments: Perfect Partners

Here is where mobile payments comes into it’s own, with a unique appeal with respect to marketing. By 2016 over 196 million smartphone users become accessible to persuasion to buy in new ways. When Amazon was founded on July 5, 21 years ago (Happy Anniversary Amazon!), Jeff Bezos and team showed that deep understanding of what we want can actually be used to help us in finding what we’re looking for without proving overly offensive. Now we are at the cusp of a new revolution, as every possible route is being explored in pursuit of a new American Dream. The subtlety with which the new marketing capabilities are used will largely decide how quickly people adopt new payment methods.

 

Loyalty provides an incentive for change

Today store-issued credit cards and store rewards are being added to Apple Pay, Google Android Pay. Soon Walgreens hopes their 80 million members of Balance Rewards program will be able to use loyalty points with Apple Pay, and all eagerly anticipate smartphone, device and watch payments to increase. The new mobile payments methods will allow consumers to save on their shopping, by directly saving with the use of loyalty rewards.

 

American providers look for world markets

But this time American providers have a much larger canvas. If they get the digital loyalty-payments nexus right, there are other markets in a high state of readiness across the Atlantic that can help their brands grow. Apparently I am not the only one to leave my loyalty card behind, on the day when I find a retailer has one of their nicest sales on - in the UK unused loyalty cards reportedly cost us shoppers an estimated £5.2 billion.

 

The future – real time payments

But as I have said before, the real value comes when channels are made to properly work together, and this is what is starting to happen in the US. On my recent visit a short while ago I found payments really getting embedded into very interesting user experiences thanks to growing investment in FinTech.

Consumers and merchants are likely to see a lot of value-add over the coming months and years as Americans increasingly declare independence from cash payments, especially if payments can become real-time, something that has proven elusive until now. Importantly, it will not be long before the ecosystems grow beyond the US, and partnerships that are under formation now are likely to be important at least in the first phase of expansion.

 

Happy Independence Week America!

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Mobile Payments in Europe: State of Play and Future Outlook

 

In this interview Christian von Hammel-Bonten shares insights on how he sees mobile payments develop across Europe, from his key position as EVP at Wirecard AG, a technology and financial services payments company that is a leader in both acquiring and issuing business across the region and world-wide.

 

Christian thanks very much for your time today. Could you please give us some context of Wirecard and what you do?

Simply said, Wirecard is a global technology group that supports companies in accepting and issuing means of electronic payments. We offer services in all roles of the payment value chain: issuing, issuing processing, payment service provider, acquiring and acquiring processing. Group operating activities in our core business are structured into key target industries: Consumer Goods, Digital Products, Travel & Mobility and Telecommunications. The idea of these verticals is to understand needs of our clients and deliver focussed solutions. In my current role, I am in charge of the Telecommunications sector that includes all products & services related to mobile payments.

 

Europe has historically had the longest history with pursuit of mobile payments. From your experience over the years how has 2014-2015 differed?

In past years, NFC was always a topic that was discussed but had not seen solutions being commercially rolled out. This changed in 2014-2015. We’ve seen launches in mobile payments, with Wirecard involved as well. Bank activities have increased with cloud based payments involving Visa and MasterCard. On top of this, the launch of Apple Pay in the US and now announced for UK, has increased awareness and interest on the merchant and consumer side.

 

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Would you say that mobile payments is converging or diverging?

I believe we are at the early stage of Mobile Payment and as I look at the early activities in Fintech we’re at the beginning of a disruptive era. When we started Wirecard 16 years ago e-commerce was below 1% of retail sales, no one would have predicted the size of retail sales online today. Looking back I compare it with the trend relating to digital cards.

The activities and discussions focussed too much on the term mobile payment. It is digital payment that may be delivered through the mobile but other device types such as wearables may be equally promising. One thing that is clear is that the physical element, namely the plastic card, increasingly disappears – it will be transformed into another form factor, digitized credit credentials.

 

But how would we extract cash in that case?

In a number of European countries we observe initiatives that are resulting in cash fading out. Take Sweden, Denmark and UK for instance. In my opinion, cash will not ever disappear in the near future but the majority of payments you receive will increasingly be digital payments going forward.

 

What are some peculiarities you observe in Europe versus your other activities in other regions such as APAC, UAE and South Africa?

Developments in E-commerce across all these regions differ, and even within Europe, countries are at different levels of maturity. E-commerce in Europe as a whole is highly developed, as we enjoy high levels of mobile coverage of good quality. Infrastructure is essential, of course, for the success of digital payments. Communications infrastructure becomes the highway for retail stores and effective communication networks are a pre-requisite.

Another factor is payment culture in various countries. The use cases and consumer needs differ. If you look at Africa it’s not NFC mobile payments that is needed, rather it is mobile money because of the lack of banking infrastructure. Across APAC again it differs widely. In Singapore there is a high penetration of cards and terminals, but in nearby Philippines this may be completely different. Similarly you can compare Germany and UK on these parameters. In Germany ELV solves merchant problems and consumers still prefer cash.

Success in payments comes from understanding the needs of players in all parts of the ecosystem. Paying with a mobile device may not be needed as a tool for financial inclusion where we have well-developed banking infrastructure, but in Western countries and world-wide, crowd funding, P2P lending and other services are rising up to meet unique consumer and business needs.

M-Pesa recently launched in Romania possibly as they identified a larger proportion of under banked, largely based on cash. This may be a viable solution in the Romanian market but not suitable for UK or Germany. Although there is a short distance geographically between European countries, there can be big difference in payments.

 

Could you share some insights from your work on mobile wallets such as with the BASE Wallet, Deutsche Telekom MyWallet, Orange Cash and Vodafone SmartPass?

We see huge differences in European markets that cause different states of readiness. In UK we have markets ready for digital payments, but Germany is somewhat behind in this respect as payment culture is different.

A good way to understand this is to study the number of terminals and the number of cards in each European market, and trace the growth of contactless in POS. Apart from UK, Switzerland is also heavily contactless. In Spain too consumers have embraced contactless payments. In other countries we have to be patient until the necessary relevance is established on the consumer side.

So we have to be somewhat patient but no one contradicts that in a few years the majority of payments will be made digitally – with a smartphone, wearable or other digital form factor.

 

Is it digital natives who are installing these apps or others interested as well?

It is really both. The ones who adopt are generally people who have an affinity to the service, but also towards technology. If you use your mobile phone today only to make phone calls you’re not perhaps someone who would adopt mobile banking and mobile payments.

Generation Y use smartphones heavily and rely on mobile banking for managing family finances. We also see that males are more predominantly early adopters of the new services.

 

Would you say there is a growing importance of the mobile number in all of this?

Yes, Certainly. Like the email address is already more important today for your communication than your postal address is, the mobile number is already a personal identifier for many activities.

The mobile number has the potential to act as a proxy for many underlying financial services. Take for example P2P transfers. It is challenging to remember bank details, more so with IBAN, so the mobile number becomes a link to your bank details in successful solutions such as Pingit, Paym or MobilePay. Also, you don’t have to remember phone numbers as the phone book does this.

 

Do you see SEPA as an instrument for achieving more consistency in payments across Europe?

At first people took some time to be convinced but today SEPA Credit Transfer and SEPA Direct Debit simplifies things for people making payments across Europe. It is a future enabler for a number of bank services and if banks want to stay competitive they need this form of interoperability.

The only thing missing is instant payments, and I hope this will come, European-wide. However banks are finding it difficult to set something like this up on their own. Really it should already have been made available across Europe, as UK already has Faster Payments. There are a number of banking innovations in the UK such as Pingit, Paym and Zapp (expected) and these are greatly facilitated by real time instant payments.

A good financial and payment infrastructure is crucial for supporting businesses and consumers. It is as important as a good road infrastructure and it is the prerequisite for innovative digital services.

 

Yes, I see how this could help to address some of the disruption to banks from FinTech, but also enable innovative new services from new entrants that compete with the banks. Speaking of this, Wirecard launched the Wirecard Smart Band based on HCE – could you please share a bit about your experience with HCE?

HCE or Cloud based payments has greatly increased the possibilities for banks, telecommunication companies and others to offer mobile payment services. In the past, almost all such projects depended on hardware-based elements such as the SIM and embedded secure elements (eSE). However, something that is hardware based has an owner who seeks control and finding collaborative models between all stakeholders delayed or prevented the launches of mobile payment solutions.

With HCE/Cloud-based payments however, such collaboration is less essential, which is its best advantage. Financial Services groups across Europe are looking closely at this technology. No solution I’ve seen is as convenient in being able to enrol users and deliver digital cards to them. Why should we buy gift cards in supermarkets, when we can just send them digitally and use gifted money through apps?

I believe the distribution of cards is about to change, and plastic cards will increasingly disappear as we have digital cards, and not just one each!

 

What does Wirecard do to help companies, say a UK-based retailer wanting to move on this opportunity?

Wirecard offers two different approaches. Firstly we help our partners to build up new card portfolios by issuing cards, irrelevant of the form factor as an issuing bank with licences for the SEPA region.

Secondly, we enable our partners to digitise their existing cards and it does not matter which NFC approach – SIM, eSE or HCE – clients prefer, we are technology-agnostic and support them all. So with respect to retailers, we enable them to issue digitized cards to their customers as part of their loyalty solution. This allows retailers to offer their customers a convenient and fast option for paying, in order to simplify overall checkout and at the same time leverage additional opportunities to engage with customers.

 

Do you also provide an app if clients don’t have one?

Yes, we have built a flexible, agile platform to cater to different environments. We offer to integrate through Software Development Kits (SDKs) with existing apps or we can provide a customized app.

All apps of our live solutions including Orange Cash and Vodafone SmartPass have been customized to meet the client’s branding and functional requirements.

 

What is the best path to interoperable mobile payments across the EU, for instance for a UK customer using a smartphone to pay in Spain, and what’s the outlook for 2015 and beyond?

Right now existing solutions are based on Visa and MasterCard specifications and may be used not just across Europe but also world-wide.

Your example is an interesting one, as travel is one of the biggest drivers for prepaid in the UK market. If you are going to Spain, instead of buying a card you can just go online, register and get your digital / virtual card, top-up and start to spend.

This is a good example of how we see the future of cards. Digitization started and progresses in many areas of our life and payment cards will be clearly affected as well. Short term we will see the first big success of a mobile payment solution with the launch of Apple Pay in UK in 2015. This will spur all activities around mobile payments in Europe and bring us closer to a world of digital cards and a cash-less society.

 

Thanks very much Christian, it has been very useful to gain your insights on mobile payments in Europe and I take this opportunity to wish you the very best for the future.


Wirecard AG_Christian von Hammel-BontenChristian von Hammel-Bonten is Executive Vice President Telecommunications at Wirecard AG. Christian has almost a decade of experience in the online payment industry. From 2002 until 2009 he was responsible for Project Management at Wirecard. Before returning to Wirecard in October 2011 Christian worked as Senior VP of Product Management for Clickandbuy, a company of Deutsche Telekom. In his current role Christian is responsible for the Telecommunications sector at Wirecard.

 


Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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The War of the Red Envelopes in the Year of the Goat

From the land that brought some of the most remarkable inventions in the world between 2000 BC and 200 BC, such as cast iron and the suspension bridge, the new frontier for modern day innovation in 2015 is Digital Money.

 

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There is a drama unfolding in China with continued strategies and lobbying between the top players – Alibaba, Tencent, Baidu, China UnionPay, the banks, the regulators and others. Like a jigsaw puzzle, each large group is assembling their “armies” – a number of different companies, groups of companies and partnerships that will help them obtain dominion over the fast evolving digital money market.

We will soon be in the midst of one of the greatest migrations in the world, as Chinese from around the world travel home to celebrate the Year of the Goat. While I wish my dear Chinese friends a wonderful New Year, I am keenly interested to see who will win the War of the Red Envelopes or 'Hong Bao' as it is called.

What is Hong Bao?

In China it is a very important tradition to gift money in red envelopes to children and younger members of your friends and family. The envelopes are red, as are most things associated with the Chinese New Year.

Last year, for the Chinese New Year, Tencent's WeChat (similar to WhatsApp) stole a march over Alipay by launching a viral and hugely enjoyable way to gift red envelopes electronically.

Tencent's WeChat got 5 million customers to send over 75 million red envelopes within 24 hours, through an electronic substitute for the centuries old tradition of Hong Bao.

This was just one in a string of digital money initiatives from the Internet Tech Giants of China. However it was highly significant in terms of gaining adoption for the WePay mobile wallet service.

What made Tencent's Hong Bao click?

In the year when the mobile internet overtook the PC internet in China, the market was just ripe for this service and Tencent pulled off a classic marketing promotion.

For me, the primary innovation was in the manner of embedding this into normal social interactions that had soared in popularity, not just in urban areas but across most of China.

The second innovation was in offering an alternative means of paying by getting people to link in their bank accounts, something we may find commonplace in the West but was quite an achievement in China at that time. Of course, now WePay had customers with means of paying, not just for the New Year but as a strong base for all the various services they launched subsequently. In 2014, China became the largest online retail market in the world, and many of the transactions now take place using smartphones.

And of course last, but by no means least was the way that the giving of Hung Bao was turned into a game. As my dear friend Michelle Zou explained to me, it was great fun for her to send money this way as an element of suspense was introduced in the way the allocated money was shared out between the designated receivers of red envelopes.

How did Tencent build on this success?

Soon after the New Year Tencent established the Weixin Group on May 6, 2014 and rebranded to create Weixin Payment services.

Last month WePay’s WeBank became the first online private bank to launch in China. One step led to another and an important first step was their New Year Hung Bao service.

So what could we expect this Chinese New Year?

So what may competitor Alibaba do this year? Their recently created ANT Financial Services Group (that includes Alipay) is well poised to counter this success. Alibaba has many significant achievements as I've described in my previous posts, and the group is shortly to launch their own private online bank.

How will competitors stay in the centre of Chinese New Year celebrations? And will one of the many other new third party payment providers (our report out this week describes 264 licenses/extensions) also have some tricks up their sleeves.

We'll know soon enough, and it is bound to be interesting.

  • Have you tried the new Hung Bao services?
  • Has anyone outside China thought of doing this for the extensive communities around the world?
  • What innovations do you expect to happen this year?
  • Have you seen a mobile wallet that achieved similar traction to what Tencent managed last year? I believe such adoption rates are very hard to achieve.
  • Would you use electronic red envelopes, or must it be cash?

I would love to hear your thoughts!

 

viewport_china_2015 We are proud to announce that our latest Viewport “Digital Money in China 2015” has just been launched this week. Do drop me a line at contact@shiftthought.com to know more about this report that is not just relevant to those doing business in China but is a must-read for anyone interested in the fast evolving Fintech, Payments and Financial Services markets.

Check out our “Focus on China” posts created in honour of The Year of the Dog, Chinese New Year 2015. Happy New Year to all our valued Chinese customers and friends around the world!

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A navigation guide into one of the most complex markets for Digital Money in the world

 

Focus on India Series : Having recently completed our in-market analysis of the emerging payments market in India, I’m confident in saying the country represents one of the world’s most complex, yet promising, battlefields for digital money. India is poised on the brink of a huge economic transformation and making money digital is a crucial part of the solution.

 

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Digital money has a tremendous future in India, and I see a convergence of several factors that combine to create an unstoppable wave. Yet for this country of over a billion people, of which May 2014 World Bank estimates show 179.6 million live below the poverty line, money is going digital in a variety of ways and the savvy providers need to recognise this in order to make their business models work.

 

 

 

India’s Demographic Dividend

Even when services are designed to appeal to the under-banked, providers cannot take their eyes off India’s rapidly growing, massive and youthful middle class. Even if one assumes only 30% of the population of India’s population of 1.2 billion is reachable, this is still a sizable 360 million, considerably larger than the 5.4 million population of Singapore and 7 million of Hong Kong, for instance. By 2015, India’s middle class is expected to be in excess of 267 million. What is more interesting is the trajectory, as the size of the middle class (monthly household income ₹ 20,000-100,000)  was a mere 25 million in 1996.

 

Precipitating Factors

I grew up in India, travelled around the country for the introduction of MICR and worked with RBI, SBI and several banks in India to help computerise different areas of banking, in my early work at Wipro and my own company Visionix. More recently I have personally visited the country to attempt to implement financial services since 2006. It was, to say the least, a test of endurance. However, many recent developments favour payments going non-cash and give me cause to believe that 2015 will be an important year for India.

Firstly, mobile penetration is remarkable and is aided by the September release of budget Android One smartphones that appeal to a highly price-sensitive market.

Secondly, a highly thrifty, large population desperately needs convenient ways to save and spend.

And, last but not least is the will of the government. The recent meeting between Mark Zuckerberg and Prime Minister Narendra Modi highlights the opportunity that digitally connecting remote villages presents to businesses around the world from a wide variety of perspectives.

 

Evidence on the ground

The cash-centric Indian economy is at last moving towards non-cash payments. By end of September 2014 more than 53 million new bank accounts were added in India to disburse benefits and social security to recipients. This is one example of initiatives from the Modi government, strongly backed by the Reserve Bank of India led by Governor Raghuram Rajan.

India’s US$4 billion e-commerce market is set to soar to US$20 billion by 2020.2 E-commerce is being driven by cheap handsets and mobile data plans that enable consumers to buy from their increasingly smart mobile devices.

 

Born Digital Money

As in Africa, mobile money is poised to strongly support financial inclusion goals. But there is more.

In my book “The Digital Money Game” I describe how people expect a whole package of services across online, mobile, social and local situations, creating a multitrillion-dollar industry worldwide. India’s market is a perfect example and consumers are demanding convergent financial services from the start, as opposed to the mobile-centric services that took off in Africa.

This requires, for instance, the ability to provide a service not just using mobile phones but through multiple channels and the ability to offer not just one service but many. Our research this year confirmed that this is needed to compete in emerging markets, and India is a prime example.

 

Reaching previously unreachable markets

Underpinning the non-cash transformation is Aadhaar, the world’s largest biometrics project that goes across all segments of the population. This paves the way for middle-class consumers to make payments to their domestic help, for instance, while also using their new wallets to pay for higher-value airline tickets, goods and services. The rise of mobile Internet access aided by smartphone penetration is bringing young and highly connected shoppers online and is creating conditions for prepaid and digital wallets to thrive.

India’s 1.25 billion people are spread across 29 states and seven union territories and, as a consequence, the complexity of the market has been likened to that of all the European markets put together. Marketing in this highly fragmented environment is challenging due to differences in regulations, income, religion and culture and, notably, the lack of government-issued identification. With just 58% of Indians registered at birth, it’s no wonder that India is the largest user of cash among all emerging countries. With little to no ability to verify their identities, unsurprisingly, just 48% of people have access to bank accounts and traditional payment cards.

 

The emergence of Cash-on-Delivery (COD)

Around 20% of Indians have Internet access, so online sales have only just begun to grow, but the opportunity is immense, particularly as consumers look for ways to digitize cash. So far Indian consumers have not given up their reliance on cash to shop online. Instead, cash-on-delivery (COD)—a uniquely Indian phenomenon—has penetrated many urban markets. This involves consumers ordering online and paying for the goods when they’re delivered, generally at home. Flipkart popularized this convenient way for consumers to shop online with confidence and without plastic cards, and the company has been rewarded with wave after wave of investment.

 

In pursuit of Cash-before-delivery

But launching truly digital money services requires that players connect the dots between the online and mobile worlds and the offline world. As the Indian e-commerce market matures, COD is giving way to CBD (cash-before-delivery). COD has caused some problems for e-commerce merchants because many consumers refuse to accept items on delivery, after the initial flush of an impulse buy has faded. To meet the demand of merchants and to fit into the increasingly mobile-centric consumer lifestyle of Indian consumers, mobile wallets and prepaid payment instruments have flooded the Indian market and challenged the prevailing COD model.

 

Connecting the dots

Our studies show that global e-commerce companies are busily pursuing their strategies to enter this nascent market and rub shoulders with the home-grown services, both categories of players must be mindful of competition from outside their immediate vision.

For e-commerce players, digital money solutions that incorporate CBD will be critical. The race is on between Amazon, Flipkart and Snapdeal. So far Amazon, which recently invested US$2 billion in India, spent this Diwali in hot pursuit of Flipkart consumers. Meanwhile Flipkart shut its payment gateway Payzippy within a year of launch and its recent acquisition, Ngpay, is expected to provide the next platform for its attempt to extend into digital money.

As what we term as a new “nationalised liberalisation” emerges and global players ramp up investment, taking advantage of new ease of doing business in India, Shift Thought offers a range of consulting services, research and portal access that offer timely and vital knowledge on how to navigate the still murky waters of building new brands in India.

 

Shift Thought offers a Navigation Guide

Recently released Shift Thought research explains why and how e-commerce strategies must evolve to compete in the new digital money industry. Our report provides facts and figures not just on the mobile wallet services that have been launched—and the unique way in which prepaid services are taking off—but on the whole set of services we term digital money. I believe that is the game that global providers will need to get right to capture the new opportunities presented by the Indian market.

Our Digital Money in India 2014 Viewport released this month explains how the competitive landscape is unfolding in India, with case studies of how providers are creating unique solutions, and this article is part of our Focus on India Series through which we share highlights of our research.

Whether you are interested in taking up the challenge of entering the market, or simply wanting to know more about what’s happening, just drop us a line today at contact@shiftthought.com and we will be delighted to talk you through some of the key trends that affect you and the various options available through which we can help.

 

Join us to discuss this further and add your valuable comments at my post on LinkedIn

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Some parts of the blog have been published in my blog “India’s E-Commerce Boom Paves Way for Digital Money” on PAYbefore Op-Ed. 

 


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Amazon makes strategic moves in the Indian market in time for the Diwali online shopping boom

The Indian $2-$4 billion market for E-Commerce heats up with new launch from Amazon

In the run up to Diwali Amazon has just made some major moves in their race to win over Indian consumers from the Cash on Delivery (COD) model to the Cash Before Delivery (CBD) model.

 

Launch of Pay with Amazon

A year after their payment processing service first launched in the US, Amazon has extended ‘Pay with Amazon’ to India this month, as the intense competition with Flipkart and snapdeal intensifies in the rapidly growing Indian E-Commerce market.

This allows Indian customers to store their card details and delivery address details for use on Amazon partner sites. This payment method is now available for Amazon, Junglee.com, Fommy.co.un, Shopyourworld.com and will be available at more e-retailers shortly.

Merchants pay a fee of 1.95% for credit cards and net banking, and a lower 0.75%-1% for debit cards.

However with India experiencing some of the highest online fraud threats, I believe Amazon will need to build in checks and counter checks of a far superior nature to anything they would have used before. Barely a year after launch Flipkart withdrew it’s Payzippy, no doubt in preparation for a more robust service that I expect we may hear more about soon.

Sell with Amazon

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While a lot is being said about how Amazon is trying to get people to buy,  what is less understood but very important according to me is what they are doing to allow the 1.2 billion Indian population to sell in an easy way. This Diwali, Amazon has announced contests to win over sellers, offering rewards for Super Sellers and Star Sellers.

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Partnership with Biyani’s Future Group

While the small merchants will come on board over time, some big partnerships are having a more immediate effect this season. Kishore Biyani is known as the father of India retail. His Future Group controls some of the largest retail chains in India: Big Bazaar, eZone, Home Town, Brand Factory and more. Now online retailing of the 40 brands are to be exclusively through Amazon, launched in India in June 2013 and now engaged in head-to-head competition with Flipkart and Snapdeal.com, the top 2 incumbents in the Indian market.

 

It’s all happening in India! In celebration of what we expect to be the largest move to non-cash anywhere in the world, we’re launching our FOCUS ON INDIA SERIES . In it we share our latest research on India through Webinars, whitepapers and more. Make sure you don’t miss out! Our unique Digital Money in India 2014 Viewport has just undergone it’s fourth revision this year, with inputs from our 3 market visits. Drop me a note at contact@shiftthought.com to find out how you can get immediate access to it, and to our portal that so perfectly complements it, or to sign up to our free research.

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E-Commerce in Thailand – Building a unique Omni-Channel Retail Experience

 

Today I am delighted to be speaking to Parin Songpracha (PS), who has been an important change agent in the Thailand payments scene. For the last 7 years, as Head of E-Commerce at 7-Eleven, Parin led important transformational changes to enable e-commerce and an omni-channel retail experience. Parin remains an advisor at 7-Eleven for E-Commerce, as this month he undertakes a new challenge as Director of eCommerce at DHL. He paints a picture of how people pay in Thailand, how this is changing and the key drivers for this change.

 

Parin, thank you for your time today. I am excited to hear your story. As a pioneer in the e-commerce scene in Thailand, could you please give us some background about your role and your achievements?

 

My journey in e-Commerce started in 2008 when I founded the e-Commerce business for 7-Eleven, starting from scratch. At the time I looked at the unique needs that people faced and designed solutions that used the ubiquitous 7-Eleven stores.

Today I continue to hold key roles in promoting e-Commerce in Thailand at the Thailand e-Commerce Association (THECA) since 2008 and the Thai Webmaster Association (TWA) since 2010. At THECA I am in charge of cross-border collaboration between Thailand and E-Commerce Associations in other ASEAN countries. We hope to launch an ASEAN Association next year.

 

How do people pay in Thailand? How have you seen this changing, and what are the needs addressed?

 

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ShopAt7.com is the 7-Eleven e-Commerce portal. This barcode payment on mobile is currently being implemented, with an expected time to market of the next 2 months. This is part of a journey that we began in 2009, and it has helped to transform the way people pay in Thailand.

The main needs regarding online payment stem from the fact that there is a low card penetration in Thailand. So firstly, as there is just about 12% card penetration this makes it difficult for shoppers. Secondly customers face a problem with transport and infrastructure that makes it hard to collect goods from far off places. Shipping to home addresses is very costly for merchants as well.

At 7-Eleven we were able to introduce a major innovation to let people pay online. Having selected their items, they now receive an SMS that they can use in-store to make payments. This unique SMS-based payment service was introduced by us as far back as 2009. At the time I visited other countries to look at Best Practice. Other 7-Eleven stores, including those in Japan had not yet started supporting the features we designed into our Thailand stores.

At the time we had roughly 3,500 stores nationwide (today we have around 8000). We offered free in-store pick up delivery and this made us very successful in e-commerce. This year we’ve achieved break-even and we expect profits next year.

From an external point of view, since 2011 the daily deals business such as Groupon further changed payments. Rocket Internet’s Lazada group has invested heavily in transforming and expanding e-commerce in Thailand.

 

How did you make changes to allow people to pay in 7-Eleven stores?

 

Green Building

 

I looked at how people pay card statements by coming into store with paper bills. The problem is they may forget to bring the bill and then payment gets delayed. How could we improve bill payments in store? I had the idea of using the mobile phone. But the code was too long at 32 digits. We first had to reduce this to 16 digits. We then made changes to ensure that both the store manager and the customers became fully comfortable with the new method of payment.

The other main improvement was in pickup. Once people order and pay in-store, goods are available for collection within 1-2 days in the Bangkok area, 4-5 days in the more remote areas, and up to 9 days for very remote islands.

 

That is a very inspiring story of innovation Parin! So what are now some of the main opportunities in the market?

I think the challenge is in bringing in innovations in stages. At first people require some hand-holding. After a few years they want the ability to do it themselves. This is how we have built and designed services, and I continue to think of ways to improve on how we do e-commerce here.

 

With the recent announcement of Apple Pay, how has E-Money and contactless payments progressed in Thailand and what have been some of the challenges?

True Money did support contactless payments through a mobile phone trial but so far proximity mobile payments have not really taken off. However, the launch of Apple Pay has made people very interested in NFC again. Although Apple does not have a large share of the market, they have the higher income big-spenders.

The low card penetration remains a problem. While direct bank payments are a solution, refunds for that method of payment take time. Imagine when a person buys an item such as an iPhone from a store and for some reason faces an issue and must ask for a refund. This could take as long as 49 days. Meanwhile he does not have the amount available to go to another store and make the purchase.

 

What are some of the main changes you expect to introduce in your role at DHL over 2015?

When we started I mentioned the logistics problem in reaching goods to people. DHL is very well positioned to support the growing number of businesses that wish to go online. We can support them for multiple solutions and I am very excited to be part of this major transformation over the next years.

 

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Thanks very much for this insightful interview Parin. I take this opportunity to congratulate you on your achievements and wish you the very best for your new role! I greatly look forward to trying out both the mobile payment and e-commerce services when I am next in beautiful Thailand!

 


parinParin Songpracha is currently Director eCommerce at DHL Thailand. Parin is an e-Commerce and Omni-channel expert from the largest retailer in Thailand. He plays a leading role in the development of E-Commerce in Thailand and in the larger ASEAN region.

Parin has a key role in promoting e-Commerce in Thailand at the Thailand e-Commerce Association (THECA) since 2008 and the Thai Webmaster Association (TWA) since 2010.

 

 


Have you got an interesting story to share about the difference you and your company are making to the way people pay around the world? If so do drop us a line at contact@shiftthought.com .

 

Charmaine Oak is Practice Lead, Digital Money  at Shift Thought

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

 

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Online payments and ecommerce in India

India’s ecommerce market is set to soar to USD 20 billion by 2020 (1), with growth generated, mainly, by the use of smartphones.

 

The USD 4 billion ecommerce is being driven by cheap handsets and mobile data plans that allow consumers to buy from their mobile devices. As we say at Shift Thought, India’s payments market is 'Born Digital Money', and this demands convergent payment services of the variety we describe in our Digital Money in India 2014 Viewport, which reflects our recent market studies in India, and from which this analysis is taken.

I had the opportunity to share my opinion on the direction of the e-commerce market with The Paypers, the Netherlands-based leading independent source of news and intelligence for professionals in the global payment community.

Click here to read the whole Expert Opinion published on 19th September 2014.

 

 

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join us to explore ideas at The Digital Money Group on LinkedIn

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The Digital Money Game– a multi-trillion dollar industry emerges

 

DMGCover

I have great pleasure in announcing the launch of my new book, The Digital Money Game. I describe the multi-trillion dollar emerging industry I term “Digital Money” from the perspective of very many different industries. It is not just meant for payment experts in large organisations, but for anyone who wants to understand how people pay, and how this is changing in each part of the world.

 

The penetration of mobile phones and smartphones is transforming the way in which consumers interact with brands and greatly facilitates a move towards non-cash payments around the world. To play the game properly though, one needs to understand the changes in a much wider set of fundamentals - identity, security, authentication, regulations, technologies and more, so as to create appropriate vision that goes across channels, services and market segments. That way you have a more effective roadmap with respect to new entrants, and a better chance that what you plan now will still be relevant when your projects go live. I share more about why I wrote The Digital Money Game here.

 

The book is based on Shift Thought research in markets around the world, and my interviews with experts from all the different industries that now participate in payments and financial services. I did my first set of interviews in July 2011. Four years later, the wisdom that they, and countless others shared with me has helped to shape this book. This is the first book in The Digital Money Series and we are currently working on others in the series.

Since then I have learnt so much from so many conversations that unfortunately it is impossible to thank each one of you by name – I hope you will recognize your contributions when you read the book!

 

The book is designed to help you to spot opportunities and gain confidence and insights to channel your work in a way that benefits you, and the markets you serve. It addresses multiple functional areas and levels: Chief Executives, Technologists, Business Development, Market Development and Product Development executives from Banking, Cards, Money Transfer, Telecoms, Payments, Technology, Retail, and Venture Financing Industries.

The digital money approach described in this book can help you create products and services that are secure, convenient and empowering to a whole range of consumers and merchants, across a variety of channels. The goal is to create a shift in thinking – from merely addressing the new opportunity provided by mobile phones, to launching holistic services that build solid brands.

 

My book is available on Amazon stores around the world, priced in local currency and immediately accessible as an  Amazon Kindle download that works across Kindle for PC and a host of commonly used devices. In case it says “Pricing information not available” just look to the right of the screen to select the Amazon site in your country.

In the first 2 days that the book has been available I am delighted to say that it has already been bought from many countries around the world. Thank you so very much for your support and kind words.

 

Have you bought my book? I would love to have your feedback and can direct you to further resources that may be of interest. Do drop me a line at contact@shiftthought.com.

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