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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