“These are exciting times for the payments industry in India with new methods of payment technologies being introduced .There are tremendous business opportunities emerging out of various payment technologies like prepaid-Payment and others in an emerging economy like India. This summit provides a great platform for all payment technology players to discuss the potential of the payment systems in the Indian market and address the challenges facing the Indian payment systems market “says Mr. Amit Goel, CEO, Knowledgefaber.
Knowledgefaber’s report on Payment Methods and Technologies focuses on where the Indian payments industry is heading to, which are new methods of payments being introduced in the market, existing business models, acceptance by consumers, security, regulatory aspects among others. The audience of the report will primarily be decision makers from the following domains including Banks, Telecom service provider, Mobile-Commerce, payment gateways, VC’s, Technology enablers among others.
The report highlights some of the key enablers for the Payment Technologies market:
Prepaid Card Scenario in India:
Prepaid cards account for only 3% of the total debit cards in circulation in India. Currently, the market for prepaid cards in India is estimated to be at $7.98 Billion and is growing at a rate of 40% each year. Payroll cards dominate the prepaid cards market with a 34% share, with travel cards at 19%, and multipurpose cards with a 27% market share (out of which, gift cards account for 5%).
Market is highly consolidated among three companies namely Axis Bank, ICICI Bank and Itz Cash Card, accounting for 73% of the market value in 2011. There is a huge potential for the expansion of prepaid cards market - if all government & other cash transactions are routed through prepaid cards. Current regulatory landscape favors banks but they focus more on credit and debit cards instead of prepaid cards while non-banking card issuers are constrained by regulations. With adoption across various sectors like online retailing, tourism, transit ticketing, government subsidies and a huge un-banked population, the future of the Indian prepaid cards market is likely to be positive.
Payment Gateway Scenario in India:
Payment gateways serve as the starting point for all online payments and are responsible for processing online transactions in secure & confidential manner. Robust growth in e- commerce segment has led to corresponding growth in Payments gateway market in India.
The market is expected to grow at a CAGR of 61% and reach US$ 100Bn by 2016. Payment gateway market in India is currently driven by a handful of players with banks such as ICICI, HDFC, Citibank, SBI having majority of the market share. Third-party vendors include players such as CC Avenue, Bill Desk and ECS (now acquired by European firm called Ogone).
Unprecedented growth in internet subscribers which is expected to be 150 mn by end of 2012; and the robust adoption of E- commerce provides tremendous growth potential for payment gateways in India. Various domestic and international vendors have identified this opportunity and are trying to establish a foothold in the market. In the past one year, international players such as Ogone and Naspers have entered the market with domestic players such as Paytm payments, Flipkart, Gharpay, Zaakpay and Juspay entering the fray. However, Mediocre transaction success rate which is only 75% across major payment gateways, lack of generic, plug – n –play payment gateways, regulatory hurdles and promotion of Cash-on-Delivery payments (which take away the need for payment gateways) in India are key challenges which needs to be addressed to be successful.
M - Payments Scenario in India:
The M-Payments scenario in India also holds a lot of opportunities in Indian market. With 920 mn mobile subscribers (March, 2012) growing at 14% year-on-year & nearly 41% unbanked population in India, M-payments has huge potential in India. The market is estimated to grow from $86 mn in 2011 to $1.15 Bn in 2016 at a CAGR of 68%. Availability of affordable handsets, low mobile tariffs and increasing voice & data network coverage across the country will emerge as key drivers for m-payments in India. Lack of adequate banking infrastructure, low internet and PC penetration are expected to provide further impetus to growth of M-payments market. However, trust coupled with security issues remain major hindrances to its adoption. Lack of awareness has also emerged as a major roadblock, specifically in the rural and un-educated mass of the country.
There are currently four different business models prevailing in this space namely Carrier dominance model, Bank dominated model, the collaborative model (Carriers and Telco’s together) and the fourth model (Peer to peer) made popular by new entrants in the payment industry like PayPal, Obopay, Mchek, etc. All these four models have their own pros and cons. The opportunity is big for all the players in the eco system, but the need of the hour is collaboration between them so that the opportunity can be profitably exploited. In the future, regulations coupled with customer acceptance would drive the decision on which business model would be ultimately adopted in most of the emerging markets.
NFC technology Scenario in India:
NFC technology is still in a nascent stage in India, but the trial of transactions based on NFC technology has started to pick up in rail ticketing, retail outlets etc. Many banks, mobile network operators, vendors and independent companies are already implementing this technology and undertaking trial runs across the country. Mobile payments are increasingly being adopted by Indian consumers – it is estimated that the m-banking transactions have more than trebled to Rs 286 crores from 91 crores.
Couple this with over 900 million mobile subscribers, 240 million bank account holders (out of which, 42% own a mobile phone) & a booming retail market, the adoption of NFC technology is expected to propel further.
Citibank launched an extensive NFC payment system trial in the Bangalore city to gather customer insights. Results were quite favourable but small sample size and high adoption incentives might have skewed the picture. Lack of awareness, interoperability, availability of NFC-enabled devices & cost barriers pose a challenge. To make inroads in such a scenario, whole NFC payments ecosystem needs to be developed simultaneously by launching massive consumer campaigns, incentivizing adoption and building infrastructure.
About Knowledgefaber:
Knowledgefaber is a "facts" based consulting and research firm that works with global organizations and helps them in identifying growth opportunities in emerging economies, mitigating risks involved and solving business challenges that may arise. We provide highly customized facts-based solutions with a quick turnaround by deploying time-tested methodologies, best-in-class talent, and vast active network across industries. Our major focus is on emerging opportunities in emerging economies.
