Payments Market in India, Mobile Wallet, Mobile Payments , Evolving Payments Ecosystem, Payments Industry , Payments Bank , Payment Gateways , Mobile Market, Payment Methods

1. Presentation By: Pradeep Kharvi
India’s Emerging
Payments Market
From Cash to Tap…

2. Table of Contents
• India’s Economic Progress
• Payments - A Rapidly Emerging Industry
• Mobile Payments in India
• Payments Bank in India
• Rise of Mobile Wallet in India
• Evolving Payments Ecosystem
• Conclusion - Payment Industry to Witness Multifold Growth

3. India’s economic progress / Financial Inclusion
• During last 10 years, enhanced job creation and household income
have lead more consumers to use financial services
• Increased per capita disposable income, Changing lifestyles &
Growing popularity of online shopping
• Central Bank initiative to increase financial inclusion (Pradhan Mantri
Jan-Dhan Yojana) and expand banking operations to this unbanked
population
…have supported the growth of the payments industry

4. Payments - A rapidly emerging industry
• With total payments approaching $9 trillion,
India’s payments industry has revenues of nearly $14 billion
• Payment flows are 7.8 times GDP
[Comparable to many Western countries and emerging
economies, such as Brazil (7.3), Italy (7.2) and the U.S. (7.0)]
• Payments contributes about 30 percent of bank revenues
• Meanwhile, electronic payments have grown significantly
• The mobile payments (m-payments) industry in India is
estimated to grow from $86 million in 2011 to $1.15 billion in
2016, with a compound annual growth rate (CAGR) of 68%
Source: McKinsey on Payments

5. Banking and Payments Customer Landscape

6. Cash Payments
• Cash continues to be the most popular payment instrument for the
majority of Indians, primarily due to a limited public awareness of
other payment instruments, or little to no access to banking
infrastructure, particularly in rural areas.
• Cash is primarily used to make small-value
payments to retailers, for the payment of utility bills,
taxes and transport fares.
• Among the rural population, cash is the
dominant form of payment.

7. From Cash to Card
• Low banking penetration levels suggest growth opportunities for banks, financial
institutions and card issuers in India. As a result, banks have introduced a number
of cards targeted at the unbanked population.
• Consumer acceptance of payment cards gradually increased during last 10 years,
as the government and banks have begun to provide basic financial access to the
unbanked population.
• This includes the expansion of infrastructure such as ATMs, the appointment of
banking correspondents (BCs), the launch of new branches, in addition to
specific efforts to change India’s consumer payment habits.

8. Payment Gateways in India
• Although financial transactions in India are primarily paper-driven, electronic payments have
witnessed noticeable growth in the last five years.
• Consumers are increasingly using credit cards, debit cards and net banking for online purchases.
• 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 $ 40B 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, BillDesk and ECS.
• 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, Juspay & Zaakpay.

9. Burgeoning Mobile Market
• India is experiencing tremendous growth in the use of Internet as well as
Mobile
• There are a just under a billion cell phone connections in India
• India adds around 6 million new cell phones every month in usage
• Although the number of Internet users
low in comparison - around 200 million users
• The conversion of cell phone users to
mobile users is fast growing
• As per telecom industry estimates,
65% of all new Internet users in India
experience their first Internet surfing
activity via mobile

10. Regulatory Support
• RBI set guidelines for prepaid payment systems in India, aligning
with the Payment and Settlement System Act 2007
• M-payments market is witnessing favorable regulatory environment
in India with RBI relaxing norms on m-payment transactions and
allowing institutions other than banks to provide m-wallet services
• Creation of National Payments Corporation of India (NPCI) as a
nodal infrastructure agency for small payments and real time
payments using Immediate Payment Service (IMPS)

11. Mobile payment demand, business models,
services and regulatory environments
Source: EY, Mobile Payment Forecast

12. Mobile Payments in India
• With 980 mn mobile subscribers growing at 14% y-o-y &
nearly 41% unbanked population in India, M-payments has
huge potential in India.
• 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.
• The market is estimated to grow from $86 mn in 2011 to
$1.15 bn in 2016 at a CAGR of 68%.
Source: Study by Knowledgefaber
Source: Capgemini - The Future of Indian Digital Wallets
The total value of transactions
through digital payment
instruments stood at Rs 21,300
crore in the 2014-15 fiscal

13. Adoption of Mobile Payment Services
Source: EY, Mobile Payment Forecast
Highest levels of
uptake are in India

14. Payments Bank in India
• Banking for the unbanked – Payments Bank
• Currently, most Indians are unbanked and
participation from private parties can boost the
financial inclusion on ground level
• The payments bank licensing will help make
inroads in rural areas and play a bigger role in
overall financial inclusion campaign
• The move will immensely help lower income
groups who do not have access to formal banking
systems. E.g., if your maid, driver, gardener opens
an account with the payment bank, you will be
able to pay their salary electronically

15. Payments Methods
CARD PAYMENTS ALTERNATIVE PAYMENTS DIGITAL WALLET PAYMENTS
• The shopper
purchases goods or
services using
their Credit Cards,
Debit Cards, Prepaid
Cards & Gift|Loyalty
Card
• E.g. MasterCard, Visa,
RuPay, etc.
• Alternative Payments
Methods do not rely
on cards
• E.g. Online Bank
Transfers, Direct
Debits, Mobile Carrier
Billings
• Digital Wallets allow
shoppers to link credit
cards or other
alternative payment
methods to a virtual
wallet.
• E.g. Paytm Wallet,
Pockets, etc.

16. Low Penetration of mobile in proximity
payments
• Penetration of mobile in proximity payments is currently negligible (less
than 2%)
• Issue: lack of necessary infrastructure for mobile payment acceptance
• Total number of POS terminals in India is less than 700,000 which equates
to 5.4% penetration
• Retailers have little capability and incentive to
acquire POS terminals
• Lack of readiness of various players to interoperate
in order to adopt the technology at scale
• Mobile payment service providers and banks need
to work together to create a seamless ecosystem for
the technology to work efficiently

17. Rise of Mobile Wallet in India
• Digital wallets have already become extremely popular with consumers
• Mobile wallet market in India is projected to surge due to
• Rising penetration rate of mobile devices,
• Increased mobile Internet user base and
• Growing government support
• mobile wallet companies offering attractive deals
• Usage of mobile wallet such as
• Money or banking transactions,
• Mobile recharge and bill payments,
• Ticket bookings,
• Utility applications, etc.
• Approval of payment bank licenses of major companies,
such as Paytm, Vodafone, Airtel, etc., is projected to drive
growth in the number of banking transactions through
mobile wallet over the next six years
US$ 200 Million
US$ 11.5 Billion
2022
2016
Expected Growth in
Mobile Wallet Market

18. Evolving Payments Ecosystem
Consumer
Access
Convenience
Security
Affordability
Choice
Flexibility
Speed of
Delivery
Ease of use
Payments banks expected to
ensure availability of electronic
payment point at 15 minute
walking distance
Easy to use application
interface, availability of content
in vernacular languages will
improve customer experience
E-commerce like speed in
delivery of financial services,
mobile as chosen channel for
delivery
Unique needs of customers will
be met as technology enables
flexibility and customization of
products at efficient cost
Combination of mass market
and niche bank and non-bank
players providing ample choice
to consumers
New bank licenses and well
funded fintechs will ensure price
wars, at least in the short run
Front and back end
authentication and firewall
measures to enable increase in
customer trust
Easy documentation, quick and
hassle free KYC processes will
incentivize utilization of financial
services
Evolving
Payments
Ecosystem to
address Customer
Pain Points

19. Conclusion - Payment industry to witness
multifold growth
• India, the “elephant ready to dance”, is bubbling with economic activities across
the spectrum of the society
• This industry has been growing steadily over the past few years. Card
transactions, both by debit and credit cards, are on an upward trajectory
• The rapid growth of smartphones, Internet penetration and e-commerce is
complementing these;
• The payment industry in India is expected to witness
multifold growth in the next few years with the entry of
payments banks and small finance banks and several
payment modes like mobile wallets and prepaid cash cards
• The future holds exciting times for the payments industry
in India, as all stakeholders and regulatory authorities come
together to achieve a “less-cash dependent” and
eventually “cashless” society

21. References
• McKinsey on Payments – A strategic review of India’s emerging payments market
• McKinsey on Payments - 16 in 2016: Trailblazing trends in global payments
• PWC - Disrupting cash : Accelerating electronic payments in India
• EY - Mobile money : the next wave of growth
• TOI Article - Mobile wallets: All you need to know
• Business Standard Artic - On the fast track from bricks to clicks
• letstalkpayments.com - Payment Market in India
• India Today Article - Banking for the unbanked
• The Cards and Payments Industry in India Emerging Trends and Opportunities to 2019
• CapGemini - The Future of Indian Digital Wallets