The Changing Scenario of the Indian Digital Payments Industry

Niranj Sangal,  Group CEO,  OMA Emirates Group.The payments industry has been experiencing advancement, growth and innovation at a steady rate. Demonetization was a learning curve which gave a push to the payments market. It urged and compelled customers to look beyond traditional cash transactions. We witnessed an increase in the deployment of PoS and mPoS terminals. Simultaneously the use of wallets and digital transactions increased. As an economy we have been progressing in the right course. The aggressive competition makes companies like OMA Emirates and MobiSwipe to keep innovating to provide the industry with cutting-edge technologies and solutions.

In an exclusive interview with siliconindia, Niranj Sangal, Group CEO of OMA Emirates Group, shares his insights about the current digital payments industry in India, the emerging trends, and its impact on technology innovation.

Tell us about the latest technologies & trends emerging in field of Digital Payments.

We have been experiencing an increasing demand for mPoS with MobiSwipe and OMA Emirates' Mobility range of smart terminals. The technology involved converts a smartphone into a Point of Sales terminal with the add-on of a secure card reader. mPoS solutions like MobiSwipe have been gaining popularity since a year considering it is a flexible, mobile and less expensive solution if compared to regular PoS. It has become a go-to solution for the retail and e-Commerce industry. Besides we also have newer technologies which are being integrated in the existing technologies. Contactless payments using NFC and RFID technology have started to gain popularity. The defining feature of this solution is that transactions are quicker, simple and secure. Solutions with Biometric finger print scanning are also gaining steam. OMA Emirates has been deploying such biometric and contactless terminals in the Middle East and we plan to introduce these in India as well in the near future.

Briefly give us a comparison of the Indian payment solutions market pre- and post- demonetization of Rs.500 & Rs.1000 currencies?

India had always been a pro-cash economy. According to a report by Ernst and Young, India has one of the lowest PoS terminals (per million people) in the world and is a country with the lowest PoS penetration amongst BRICS nation. Having easy access to cash, in the pre-demonetization phase there was resistance towards digital payments and demonetization broke into it. The entire payments ecosystem experienced a much needed and swift paradigm-shift. The demand for PoS terminals spiked. Retail stores accepting card payments have increased to over 25 lakhs as opposed to 15 lakhs before demonetization. A recent research indicates that the POS terminal market in India is projected to grow at a CAGR of over 16 percent from 2017 to 2023. The market size is over four crore terminals, which indicates that there is vast opportunity.

Being a part of this industry, we have identified that it is the smaller cities where penetration of PoS and other such payment options are required.
These cities are gradually adapting to the concept of digital transactions in the form of apps and wallets, PoS, internet banking, mobile banking, etc. and are seeking for simple secure options. We have seen interest and acceptance for MobiSwipe in such cities and we plan to deploy over 50,000 mPoS devices across India by end of 2017. At the same time, there is a demand for regular PoS terminals as well and we are certain of setting up at least 1,00,000 terminals simultaneously.

Consumers and merchants in smaller cities are open to trying out new technologies and this has facilitated the penetration of non-cash payments to a great extent.

What are the major security issues posing a threat to the digital payments industry? How can they be tackled successfully?

All digital transactions that take place via terminals like PoS and mPoS are EMV compliant. This would mean that it is mandatory for a consumer to input his PIN to validate a transaction. Without the PIN, the transaction does not get the required validation. With other digital modes available like mobile wallets and CNP (Card Not Present), a majority of banks have started to validate every transaction with a One Time Password (OTP). All these measures ensure a seamless, safe and secure way of transacting.

What according to you are the other major challenges that companies are facing while offering Digital Payment solutions?

One of the main challenges in digital payments is the Interchange fee. Lowering the fee will work in favour of increasing the number of transactions. The RBI had recently reduced this fee post demonetization from January 1, to March 31 for debit cards which benefitted the industry. At OMA Emirates, we have always promoted digital forms of payments considering the benefits associated with such transactions and will always try and reduce the costs associated so as to make digital payments a favourable option for all.

Tell us about the regulatory compliances that need to be adhered to while offering digital payments/digital wallets in India?

For Digital Payments especially through Wallets, there are guidelines issued by RBI in India. These guidelines get revised on timely basis which make for a more transparent ecosystem in the payments space. Companies offering wallets are required to convert existing wallets which are without KYC to full KYC compliant wallets within a period of 60 days from the date of issue. In failing to do so, further credit transfers will not be allowed into the wallets. Currently, wallets without KYC have a limit of Rs. 20,000 while the fully KYC compliant wallets can store up to a monthly limit of Rs. 1 lakh. Having such norms regulates irregular use and exploitation of such services.

For companies offering Digital Payment solutions, what are the best storage/backup methods to maintain user data while maintaining data security?

Data storage is one of the most critical and essential aspects of our industry. Digital payments Banks and E-Wallet companies have set up safe, secure and compliant data centres in their premises and other data centres. For data security, banks and wallets are now using Aadhar Based payment systems making use of Biometrics, OTP (One Time Password), EMV (Chip+Pin) technology for Card acceptance. Collaboratively these have always helped in maintaining data security for companies as well as customers.

How do you see the digital payment players working along with the Government of India to take this to the remotest areas of India to facilitate digital payments?

The interest we have received from smaller Tier-2 and Tier-3 cities for MobiSwipe is extremely positive. Merchants initially would shy away from the concept of E-payments, however they now understand the need to make such options available. At the same time, there is increasing awareness among the consumers community for wallets, and therefore there is an additional need to make these options available. The government has been creating awareness and promoting digital modes of payments like BHIM, UPI and USSD which are great initiatives to start off with. Rural marketing initiatives which are being undertaken have been educating the population in these areas about these initiatives along with the other payment options that the industry has to offer. Consumers and merchants in smaller cities are open to trying out new technologies and this has facilitated the penetration of non-cash payments to a great extent. While progress and transition cannot take place overnight, there is definitely more acceptance to such payment options in remote areas.