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Bit by bit: When micro payments think big

January 26, 2016 | The Financial Express

Source - http://www.financialexpress.com/article/fe-columnist/bit-by-bit-when-micro-payments-think-big/197678/

Quietly, there has been a major revolution afoot across India, one that does not get talked about as much as it should. And this is the mobile payments revolution. What started a few years ago as a convenience people turned to when they had to quickly add a R10 recharge on their prepaid phone, has now spawned into an economy of its own. India was willing to take the risk of mobile payments with Rs 10 and gradually this has helped the recharge companies garner trust and huge user bases. So much so that this confidence is now good enough for Indians to use these services to pay for anything from taxi rides to real estate bookings.

Credit card penetration in India is still facing a lot of hurdles and might continue to find resistance, but mobile wallets are slowly starting to fill this gap. While most of India might not have a credit card to turn to when they want to create a new Apple ID, they have no issues buying a new song or game using their mobile wallets. While it is a surprise that these payment options have not found native adoption on Google’s Android or Apple’s iOS for Indian users, the app developers have been wiser and are already tapping into this new no-cash economy. Taxi apps might be the one sector that makes the best use of a PayTM or a MobiKwik recharge; and it is when you queue up to enter a movie theatre that you see the sheer number of people showing their phones for scanning instead of presenting a physical ticket. This is the trickle-down effect.

The sheer number of users most of the top Indian mobile payment companies are now talking about is staggering. PayTM, for instance, claims over 100 million users, almost half the numbers of global net payment giant PayPal. We are nowhere near the penetration mobile payments have in Kenya for instance, but given the size of our population and economy, the numbers we have are significant too.

And there is some very Indian innovation happening around very Indian problems. It took me a while to understand the concept and I am still not sure it will work, but PaySe is interesting nonetheless. Ashutosh Pande, founder and chief innovation officer of PaySe, calls his product digital cash. “It retains the attributes of cash—offline, peer-to-peer and secure. PaySe utilises the latest advances in mobility, big data, open source and crypto tokenisation to deliver the world’s first secure offline peer-to-peer payment solution,” he explains. In simple words, the company offers a PurSe mobile wallet, almost like a credit card, to carry the digital cash offline and when a person withdraws PaySe digital cash is transferred into their PurSe. “They can use PaySe like cash or get it converted into cash. Any transaction where money is leaving the PurSe requires the user to enter a four-digit code to make a successful transaction,” explains Pande, who foresees banks, microfinance institutes, payments banks, small finance banks and e-commerce companies becoming part of the platform.

Trying to offer a more secure, unhackable solution in comparison to the mobile phone, Pande says PaySe is working on a slim SIM-based solution where the secure memory is provided in a stickON base that can be pasted onto the SIM card of a phone and the phone accessory called the PurSe. He says the bait for merchants to come on board will be the fact that there is no delay in crediting payments and there is no Merchant Discount Rate, which, at almost 2.5%, could be almost half his margin for some transactions. “The merchant realises the complete value of the transaction immediately. The funds are instantly accessible to the merchant; there is no dispute and no delayed credit,” he explains.

While it will be tough for a new platform and stream of thought to get wide currency in a market such as India, this is certainly the kind of innovative thinking that will help the country leapfrog the entire credit card gap in our economy. In addition, the segment is now clearly moving beyond micro-payments and transactions of up to R1 lakh can now be cleared if the users has got his KYC done. This, coupled with EMI options in the segment, could be what makes this ideal payment solution for India.