While it is an acknowledged fact that India is primarily a cash society, electronic forms of payment are slowly but surely gaining a foothold in India. While there are real structural challenges in India with limited number of POS (Point of Sales) and ATMs (Automated Teller Machine), retail electronic payments are growing at a steady rate. The structural challenges in India severely constrain the existence of the 4 party payments model - Issuer bank, Acquirer bank, Consumer and participating retailer. Having said that, increase in number of ATMs and a concerted effort to increase merchant card acceptance points has positively influenced debit /credit card usage.
A convergence of forces is further creating tailwinds for retail electronic payments. While in other countries, some of these changes have occurred sequentially, India is experiencing these changes at the same time. Some of these changes are 1) Emergence of RuPay domestic network 2) Explosive growth in mobile coverage; 3) Regulatory clouds are clearing up; 4) UID and other enablers are coming online; 5) Government is using mandates in some cases to speed adoption.
While cash is expected to remain a dominant form of payment in the near to medium term, there are strong growth opportunities for players who innovate to overcome the structural challenges, effectively segment and target the customers, market their products with the right messaging to overcome the cultural and psychological barriers. With the RBI move towards EMV Cards (Chip and PIN based) , the fraud rate is expected to come down bringing down the psychological barriers in using cards as a payment mechanism.
Backed by deep market, regulatory and customer insights, Deloitte’s India Payments team has helped clients understand regulatory implications, innovate, develop go-to-market strategies, program manage large transformational projects and develop operating models. The payments practice in India works closely with Deloitte’s Global Payments practice to deliver global best practices and insights to our Indian clients.
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