A Journey into the World of Mobile Payments

Mobile Payment

India is witnessing a digital revolution especially in the Fintech and payment landscape. The reason could largely be attributed to the advent and innovation of smart technologies paving a way to new-age digital banking and mobile payment system in the country. Along with this, Government and other regulatory bodies in India are making all the necessary changes to move the country from a cash-based to less-cash and ultimately to a cashless society. Let’s explore more about Digital Payments in India, their rise, major challenges and solutions.

Rise in Mobile and Digital Payments

At one point of time mobile phones in India were regarded as an item of luxury, but now it has become an item of utility making mobile a low-cost mean to access digital payments.

Mobile Payment

Most Common Ways of Mobile Payments

Now let us check how you can use your mobile to make payments!

QR Code-based Merchant Payment

QR Code payments are gaining momentum as many wallet companies are relying on this mode of digital payment. It greatly reduces the cost of merchant set up in regard to POS terminal cost. Also the merchant boarding process is much simpler in QR-Code based payment.

How to works?

  • Every merchant wallet has an associated QR Code. The QR code sticker is normally displayed at the cash-counters.
  • For making the payment, the customer scans the QR code through their mobile wallets, enter the specific amount and choose to pay through the money in their wallet.
  • After the completion of the payment, an SMS or in-app notification is sent to the merchant and the customer.

Aadhaar-based Payment

To make Aadhaar-based payment, merchant needs a biometric scanner and an account linked to the Aadhaar database. Instead of biometric scanner merchant can also use the mobile phones with iris scanners. It further reduces the set up cost as eliminates the need of biometric scanner.

How it works?

  • Customer will scan his/her finger on biometric device or iris scanner enabled on phone.
  • Verification of the customer through the Aadhaar-associated account number
  • Transaction is processed
  • Transaction confirmed through SMS / in-app notification

UPI Payments

Each customer will get a unique ID from the UPI which will act as his/her payment address. Funds can then be transferred electronically using mobile and the unique ID.

  • Customer will login to UPI app as given by the Payment Service Provider (PSP).
  • Customer enters the amount and the merchant’s information
  • Authentication of the transaction by the customer using MPIN
  • PSP will process the transaction through the UPI network and authorize by the customer’s bank
  • The customer and the merchant get a payment notification
  • The merchant now logs into the UPI app and request a payment by entering the customer’s payment address and the amount.
  • PSP processes the transaction through NPCI and sends an authorization requests to the customer
  • Customer then approves the payment. Transaction is processed by debiting the customer’s account, crediting the merchant’s account and providing a transaction notification to both the merchant and the customer

USSD Payments
*99# is a USSD (Unstructured Supplementary Service Data) based mobile banking service from NPCI that brings together diverse ecosystem partners such as Banks & TSPs (Telecom Service Providers). Using *99# service, a customer can access financial services by dialling *99# from his/her mobile registered with the bank. The service works across all GSM service providers and handsets

  1. Fund Transfer using Mobile Number and MMID – User can transfer fund using MMID and Mobile number of the Beneficiary.
  2. Fund Transfer using IFSC and Account Number – User can transfer fund using IFS Code and Account number of the Beneficiary.
  3. Fund Transfer using Aadhaar Number – User can transfer fund using Aadhaar number of the Beneficiary

E-Wallets

With the recent demonetization drive, e-Wallets companies in India have received a huge push. You can add money in your e-wallets from your bank via credit/debit cards or net banking which then can be used to make payments. E-wallets or mobile wallets are virtual wallets allowing customers to pay for almost anything and everything. Majority of wallets are closed wallets i.e. money transference between people with the same wallet or payments at merchants can be made who are authorised to accept from that particular e-wallet.

Mobile Payment Challenges

Though number of mobile payments are increasing in the country yet these are not free from challenges. Few of the hurdles are –

Need of Global Standards

In order to make the mobile payments a reality in India, we need to have standards and interoperability in place. Achieving international compatibility, common interfaces and use of single platform for making payments will increase the mobile payment engagement.

Poor Connectivity

Two/third of India’s total population is still rural, making it approximately 870 million people. Internet penetration in most of the remote areas and rural India is a problem. This impacts the speed of transactions and results in poor customer experience. Customer might rethink to make mobile payment if a solution to poor connectivity is not found.

Digital Literacy

A large chunk of India’s population is not tech savvy and uncomfortable in using technology for making payments. Customers need to be educated and the technology must be simplified further.

Security Concerns

Mobile payment in India can gain traction only if the security concerns are met and dealt with as data security is still an issue. Most of the consumers worries about the data being  leaked to some wrong hands during processing.

Mobile Payment Challenges 

Here are the solutions to the Mobile Payment Challenges –

Mobile Payment

 

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