27 F<strong>in</strong>tech <strong>in</strong> <strong>India</strong> - A global growth story • Increased penetration of virtual currency: Built on the blockcha<strong>in</strong> <strong>in</strong>frastructure, virtual currency is enabl<strong>in</strong>g better speed and efficiency of transaction. With more than 90 per cent share, Bitco<strong>in</strong> is the lead<strong>in</strong>g virtual currency <strong>in</strong> an approximate USD 7 billion market 05 . • Omni channel offer<strong>in</strong>gs: The framework of digital payments provides a seamless customer experience across channels lead<strong>in</strong>g to better transaction experience. • Rise of marketplace banks: Challenger banks are be<strong>in</strong>g supported across geographies and given licenses to operate freely. E.g. Rise of ATOM and Tandem <strong>in</strong> UK. Also, banks have started expos<strong>in</strong>g their APIs to third parties for large scale payments transformation. E.g. National Australian Bank opened up its API to cloud account<strong>in</strong>g firm Xero. • Harmonisation of standards: Various <strong>in</strong>ternational bodies are facilitat<strong>in</strong>g standardisation <strong>in</strong> payments. Some key examples are T2S, a s<strong>in</strong>gle pan European settlement <strong>in</strong>frastructure for creat<strong>in</strong>g settlement efficiencies and an <strong>in</strong>ternational payments framework between the U.S. and Europe. These are lead<strong>in</strong>g to a modular approach for implementations. • Banks’ collaboration with non-bank<strong>in</strong>g players across the world: JP Morgan partnered with Wal-Mart and Shell for its new payment solution to ga<strong>in</strong> the advantage of scale 06 . • F<strong>in</strong>tech companies digitiz<strong>in</strong>g the <strong>in</strong>ternational remittance process: The U.K. based companies Transfer Wise and World Remit have essentially digitized the Western Union network and received significant amount of fund<strong>in</strong>g for their <strong>in</strong>novative approach on <strong>in</strong>ternational remittances 07 . <strong>India</strong> overview The <strong>India</strong>n payments sector is <strong>in</strong> the midst of rapid <strong>in</strong>novation, propelled by chang<strong>in</strong>g consumer patterns and <strong>in</strong>itiatives taken by regulatory and bank<strong>in</strong>g <strong>in</strong>stitutions. This has been supplemented by large scale adoption of mobile payments. The mobile payment <strong>in</strong>dustry <strong>in</strong> <strong>India</strong> is valued at about USD 1.15 billion <strong>in</strong> 2016, grow<strong>in</strong>g from USD 86 million <strong>in</strong> 2011, clock<strong>in</strong>g at CAGR of 68 per cent 08 . Additionally, the mobile wallet <strong>in</strong>dustry is poised to reach USD 183 million by 2019 09 . Over the past few years f<strong>in</strong>tech providers have been really <strong>in</strong>strumental <strong>in</strong> pav<strong>in</strong>g the way for adoption of next generation payments <strong>in</strong> <strong>India</strong>. This has been enabled by the ris<strong>in</strong>g adoption of smartphones specifically <strong>in</strong> rural areas. Thus, result<strong>in</strong>g <strong>in</strong> a substantial jump <strong>in</strong> the growth of mobile payments <strong>in</strong> <strong>India</strong>. Furthermore, start-ups are com<strong>in</strong>g up with <strong>in</strong>novative technologies to provide a smooth experience across channels such as, Paynimo payment platform, which is capable of transact<strong>in</strong>g across platform, channels and devices allow<strong>in</strong>g merchants to transact through smartphones. Many start-ups have entered the space to simplify mobile money transfer, such as Chillr application, which provides peer-to-peer money transfer without us<strong>in</strong>g bank account details. Few of the lead<strong>in</strong>g <strong>India</strong>n Banks are leverag<strong>in</strong>g the Chillr platform for P2P payments 10 . Several lead<strong>in</strong>g banks are launch<strong>in</strong>g their own digital wallets leverag<strong>in</strong>g NPCI’s Immediate Payment Service (IMPS) platform. These digital wallets are <strong>in</strong>tegrated with social media features. Few examples are Buddy by SBI and LIME by Axis. Similarly, few banks are go<strong>in</strong>g for payment solutions enabl<strong>in</strong>g money transfer, P2P transfer, etc. for smartphone users, such as P<strong>in</strong>gPay and PayZapp. Even the <strong>India</strong>n government is keen on adapt<strong>in</strong>g to the Cashless Bharat vision and has taken noteworthy steps to achieve the goal: • Launched UPI (Unified Payment <strong>in</strong>terface), a digital payment system for mobile-to-mobile money transfer. It enables customers to transact through an app l<strong>in</strong>ked with their bank accounts. The vision beh<strong>in</strong>d this as shared by RBI was to migrate <strong>India</strong> towards a less cash and more digital society. • Granted licences to 11 payment banks last year for achiev<strong>in</strong>g the objective of f<strong>in</strong>ancial <strong>in</strong>clusion by mak<strong>in</strong>g best use of reach and technology prowess of f<strong>in</strong>tech providers <strong>in</strong> remote areas 11 . • The Reserve Bank of <strong>India</strong> (‘RBI’) has given <strong>in</strong>-pr<strong>in</strong>ciple approval to 33 entities, which had applied for operat<strong>in</strong>g as a Bharat Bill Payment Operat<strong>in</strong>g Unit (‘BBPOU’) under the Bharat Bill Payment System (‘BBPS’). BBPS is an <strong>in</strong>tegrated bill payment system which would offer <strong>in</strong>teroperable bill payment service to customers onl<strong>in</strong>e as well as through a network of agents on the ground. 05 Bitco<strong>in</strong> Market Cap Above USD7 Billion as Price Crosses USD450, F<strong>in</strong>ance Magnates website, http://www.f<strong>in</strong>ancemagnates.com/cryptocurrency/trad<strong>in</strong>g/bitco<strong>in</strong>-market-cap-7- billion-price-crosses-450/, accessed on 10 May 2016. 6 The latest <strong>in</strong> the battle to own your digital wallet, CNBC, 26 October 2015, http://www.cnbc.com/2015/10/26/the-latest-<strong>in</strong>-the-battle-to-own-your-digital-wallet.html accessed on 30 May 2016. 07 WorldRemit Raises USD100M To Take On Western Union In Money Transfers, Tech Crunch, 17 February 2015, http://techcrunch.com/2015/02/17/worldremit/ accessed on 30 May 2016. 08 Sl<strong>in</strong>gs and arrows, The Economist website, http://www.economist.com/sites/default/files/20150509_<strong>in</strong>tl_bank<strong>in</strong>g.pdf, accessed on 10 May 2016. 09 Global mobile proximity payment users to surpass 1 billion by 2019, Ovum website, http://www.ovum.com/press_releases/global-mobile-proximity-payment-users-to-surpass-1- billion-by-2019/, accessed on 10 May 2016. 10 Bank of Baroda first PSU bank to jo<strong>in</strong> Chillr platform, The Times of <strong>India</strong>, 19 October 2015, http://timesof<strong>in</strong>dia.<strong>in</strong>diatimes.com/tech/tech-news/Bank-of-Baroda-first-PSU-bank-to-jo<strong>in</strong>- Chillr-platform/articleshow/49456039.cms accessed on 30 May 2016. 11 It’s like PayPal but pays <strong>in</strong>terest, and <strong>India</strong>’s banks are afraid, Live M<strong>in</strong>t, 10 September 2015, http://www.livem<strong>in</strong>t.com/Companies/rG7p9EGePidtjAaTyEMxcL/Its-like-PayPal-butpays-<strong>in</strong>terest-and-<strong>India</strong>s-banks-are-af.html accessed on 30 May 2016. © 2016 KPMG, an <strong>India</strong>n Registered Partnership and a member firm of the KPMG network of <strong>in</strong>dependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
F<strong>in</strong>tech <strong>in</strong> <strong>India</strong> - A global growth story 28 The future of payment is undergo<strong>in</strong>g a transformation, as new entrants are enabl<strong>in</strong>g the market with new technologies such as contactless payment, NFC enabled smartphones, cloud-based PoS and digital wallets. Exist<strong>in</strong>g players should opt for strategic collaboration across sectors to <strong>in</strong>crease customer acceptance, penetration of digital payments and create a lucrative model for each participant. © 2016 KPMG, an <strong>India</strong>n Registered Partnership and a member firm of the KPMG network of <strong>in</strong>dependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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