Interesting developments on mobile payments over past quarter or so. I think the space for startups to play has shifted significantly due to these.
First, the announcement of NPCI mobile payment service is a big development. Practically, this kills any mobile payment technology initiative in the short run. Not because it will necessarily be successful – I do hope so – but because partnering with banks for any new provider will be hard till NPCI solution plays out. So in the best case, NPCI solution takes off and relieves the electronic payment issues. In the worst case, NPCI solution doesnt take off, and private solutions get crowded out of banks’ attention zone! Some private mobile payment providers are serving the need for two factor authentication, and it remains to be seen how substantially the UID system challenges that. Overall, my sense is that erstwhile mobile payment providers potentially have to turn into more of business correspondents, or shift their position. To me the key technology gap currently is the user experience that bridges an intent of the transaction to the payment mechanism – between buying and paying. A compelling service in that area that provides great user experience would be useful.
Second, the alignment between banks and telcos is great news for large scale distribution of financial services to unbanked customers. The key bottleneck on this end so far has been the economics. It remains to be seen if the telco channels will serve comprehensive financial inclusion needs, or skim the market where the margins are – such as remittances. Another strong candidate for such partnerships are perhaps the consumer packages goods companies (unilever, p&g) who have large scale distribution. Making the financial inclusion product line attractive enough to capture retailers’ interest, but not too attractive to lose retailers’ existing product focus (such as airtime or soaps), will be a key balancing act. The overall business correspondent market is likely to remain fragmented, and challenging for startups. However, if these large partnerships do take off and land up making a substantial impact, banks will need additional pieces of technology, including augmentations to their core banking systems, to support the same. That might be another area for new technology based startups to look at.
The third obvious area are services that can use these platform facilities around electronic payments – including mcommerce.
Overall, exciting times ahead. What do you think are the opportunities these developments open up?
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Alok,
You are right on the dot on this one.
Interesting to note is also that, this essentially undercuts all the other transaction platforms like Visa and Mastercard. Also, it shows that India can do the same thing as the startup Square, without needing iPhones or that dongle! 🙂
PS: RTBI was one of the organizations that played a role in making this standards possible as part of MPFI. NCPI is the implementation partner in the equation.
Hi Alok, great post: this is something I’ve been thinking of as well. The direct to consumer game for mobile payment companies is over, and ownership of the customer will invariably vest with the bank. This is because of the way regulations have been framed in the country, and the regulatory risk that these startups (and their investors) faced are worth pointing out. It’s more of a VAS + platform play for them now, or, as you pointed out, a banking correspondent play. Looks like Eko made the right bets.
Hi Alok,
Interesting times ahead. A few opportunities that could emerge:
1. Loyalty : With bank account, UIDAI and mobile subscriber data, customer profiling and targeting can get much sharper. Opportunities could emerge for programmes offering location based offers or loyalty programmes with categories that are not connected with the end transactions to consumers (FMCG etc….linked with the emergence of face to face / over the counter payment transactions.
2. Fraud Management : I like the euphoria building up, but when millions of retailers commence taking deposits, there is a likelihood for fraud. Fraud detection and forecasting models may need to evolve for this new space.
3. Training :
The engagement and interaction levels of retailers with distributors is different from an FMCG environment, where the face to face interaction is much higher.
Selling soaps and no-frills bank accounts are rather different. Any large corporate such as a mobile operator seeking to scale may need external agencies to train and monitor the retailer community.
4. User Interface! I couldn’t agree with you more. Was attending a conference a couple of years earlier, when one of the MFIs indicated that the euphoria was good, but most of their customers struggled using their mobile phones to make calls! Accessing bank accounts and making payments! Thats a whole differnt ball game.
The user experience needs to be built ground up and keep the bankers away!
Several more…but for another day!