Navin Surya’s journey in payments, reflects brilliantly the journey of payments in India. From the early days when card issuers were explaining the concept of credit, debit & prepaid cards, and acquirers were installing POS terminals to merchant establishments across India. The journey for those like Navin, has been challenging and fulfilling, to see electronic payments blossoming.
However, this is a new journey from hereon, and what got us here, may not necessarily take us where we can be.
Navin is the Chariman (Non Executive) @ Fintech Convergence Council (FCC), Member (Non Executive Position) @ NPCI Innovation Council and an advisor to several organizations. He has also served as the Managing Director @ ItzCash Card Ltd. and as the Chairman @ Payment Council of India (PCI)
The Ideaearth team spoke with Navin, to understand his journey and vision for payments in India. He has outlined what is essential and required for electronic payments to increase penetration and grow multi fold. Also, key insights into what innovators and breakthrough teams need, to succeed in payments.
1. Payments has grown exponentially over the last decade in India. Which are the key factors which made it possible and which are still constraining the same?
Yes, the payments industry has been growing at a double-digit rate, and will continue to in the coming years.
There have been many growth drivers, and some of the key ones are
a) Participation of Non-banks in the payments eco system as direct RBI regulated entities
b) Access to IMPS for Prepaid Payment Instruments (PPIs), resulting in very large number of migrant workers being connected for digital remittances - nearly 15-18K Crs monthly
c) Inter-operability for PPIs
d) IMPS/UPI rail roads for the industry
However digital payment penetration vs. Cash as a Payment option for retail payment is still around 10% which means the journey ahead to drive digital payments to 50% +is still long.
The fundamental aspect which needs to be addressed is driving parity between cash and digital. Convenience of physical cash in terms of liquidity, anonymity and acceptance besides being store of value is yet to be matched by digital. In fact, all digital payment instruments, be it Debit/Credit/Prepaid Cards, Wallet, UPI are still not close to Cash on key parameters like liquidity, anonymity, acceptance and store of value.
Most of the digital payment’s growth has been driven by the rise of Internet commerce. We would need much more to achieve increased share of digital transactions.
2. Which are the three areas/use cases which are extremely important for payments to maintain increase penetration and growth in the coming years?
a) Retail spends at Mom-n-Pop / Unorganized stores for daily consumption items
b) Toll and Transit both public and private across the country spanning Central/State/City/Municipality owned transit/toll systems. Very critical to have an integrated standards and compulsory rolling out of open standard payment systems which can be accessed and participated by all consumers and payment systems.
c) Creating propositions for Self-employed professionals like Mechanics, Vegetable Vendors, Plumbers, Carpenters, Household help etc.
3. Which are the areas in payments which need innovation and fresh thinking?
a) Regulation: A shift from current entity and rule based to Principle based or Risk Based
b) Sandbox: Sandboxes need to be open, flexible and accessible
c) International Remittances and cross border Merchant Payments: Can be expanded across payment systems to openly participate to bring new innovation and transparency to consumers which is currently lacking especially when forex conversion is involved
d) Inter-operability: This would need to be at par between banks and non-banks and for all non-banks players (including Merchant Aggregators and Acquirers) and not just with access to payment networks (Visa/MasterCard/Rupay/IMPS/UPI) but also across settlement systems (NEFT/RTGS)
e) Pricing de-Control: Pricing would need to be completely left to market and let industry players openly compete and provide the best possible cost and service trade off. Artificially controlling Merchant Discount Rates (MDRs) would restrict market participation by larger and many players.
f) Implementation and use of Block Chain across financial services to manage fraud and increase efficiency
g) Government backed RBI issued legal tender digital currency is critical for faster digital payment penetration and to drive financial inclusion.
4. You've been a successful entrepreneur and statesman for the payments industry, in driving change. What is essential for innovators and ideators to drive change in their businesses and markets?
Successful entrepreneurs in financial services need to work on Expanding boundaries for their play-ground. One must work on their critical boundary conditions that can limit their future growth and potential in terms of market access, consumer access, product access. These are critical for size, scale and growth of business volume, value, revenue and profits and exactly in that order. In India issue is not of the opportunity size and possibility for size, scale and growth. However, these all are currently determined by who you are (type of entity), what boundary conditions government policies and regulations are defining for you, keeping the spirit of policy and regulation and also containing possible risks one needs to re-define these boundaries continuously to stay relevant and achieve success.
5. If you had a vision for Payments in India for 2025, what would that be? (Some KPIs / highlights would be great)
- Digital payments to be 50% of all retail spend in the country
- It would mean that current monthly value of digital payments of USD 250bn (approximately) needs to grow 10x minimum by 2025.
6. There has been a lot of emphasis on technology. What else needs to be done to make payments simpler and more accessible to a wider audience in India?
Importance of technology cannot be ignored in payments, however considering current market conditions and consumer demography (especially of those excluded from formal payments).
For next two to three years Hybrid or Omni-channel strategy is very critical. A healthy mix of physical and digital in terms of products and consumer channels is very critical. One shoe fit all may not work as more than 70%+ of the population is still excluded from digital payments and 20% are infrequent users. Only 10% are real active users of full digital payment services.
'Technology with a Human Touch' to be mantra for next 3-5 years to expand the consumer base to 50%+. There’s a need for greater empathy and localization in the communication and processes.
7. Which are those payment innovations which have really excited you in recent years?
Cryptocurrencies or Crypto Assets are the holy grail of payments. And I do understand due to the speculative nature of these crypto assets and lack of full understanding of how these models work, we are currently witnessing very high resistance in India from regulators to look at these options seriously.
My personal belief is that Information is democratized by the Internet and in the same way money can be democratized by Crypto Assets and at a global level. There are some serious implication and risks however with 'Ignoring' or ‘living in Denial' by just indirectly banning or restricting such products.
I sincerely hope and believe that our policy makers and regulators seriously look at digitising our legal tender currency and then it may be represented in part physical and digital basis needs and requirement. In fact, all wholesale transactions would just work with digital format and for retail frangibility between physical and digital is the way to go and over a period of time, as people find and understand the benefits physical would start reducing drastically.
8. What kind of innovations / problem statements which really excite you?
- Block Chain
- Space Travel
- Device Less
- Green or Wireless Energy
- Not possible
- Can't be done
- No one has done this before
- High positive Impact on consumers and country
- Multi Industry Impact