2014 has been a significant year for digital payments industry and has seen a number of developments emerging in the wallet space and its increased adoption. Here are some of the trends we’ve observed
- Increased usage of mobile wallets: A number of players have seen that payments have shifted on mobile devices and adoption is on the rise. Amit Lakhotia head of digital payments at Paytm points out that about 60-70% of transactions have happened on mobile and points out one of the reasons for this is that net banking pages for banks have not been optimized for the mobile devices and due to the high mobile penetration in India, many people’s first internet experience has been on mobile. Paytm launched its digital wallet in January 2014 and have about 18 million wallets in India and the company acquired them in about 11 months. Paytm also claims that it sees about 15 million transactions per month on the wallet alone.Mobikwik said that 35% of its transactions of the wallet during the Google Online Shopping Festival were done on mobiles.
- Launch of Apple Pay: The launch of Apple Pay in the United States which tied different components of the billing chain (marketplace, payment information, physical device) would be a game changer for mobile phone makers and others might soon follow suit. There are reports that Samsung is developing its own mobile payment company.
- Messenger applications are getting in on payments : One of the trends we noticed was that messenger applications have been trying to add value to their existing services and extending payments on their platforms. Some of the notable examples are LINE and Snapchat. There were also reports that Facebook is developing payments on its Messenger application. Closer home, Oxigen says that it has developed payments on its wallet service through Whatsapp. Email services too started reinventing themselves to allow transactions over their services, most notably Gmail which launched its service in November in the United States. In India, Kotak Mahindra Bank launched its Mail Money service to allow payments over email.
Policy developments in 2014
- The Reserve Bank of India curbs on card payments without two-factor authentication: Earlier in August, the RBI had directed e-commerce players and online taxi aggregators that they have to have two-factor authentication for payments using credit and debit cards. Services such as Uber, Amazon, Google Play, Apple App Store, international e-commerce stores like Alibaba, among others, were side-stepping norms applicable for Indian payment gateways. You can check our coverage on the same. However, it is also interesting to note that the RBI has said that it will come out with detailed guidelines for single-factor authentication for small transactions on debit and credit cards.
- RBI relaxes norms for prepaid payments instruments: Given the increased usage of wallets, the RBI increased the limits of semi-closed PPIs with full KYC from Rs 50,000 to Rs 1,00,000. The RBI also decided to allow two new categories of open system of pre-paid instruments which permit cash withdrawal at ATMs / BCs.
- RBI issues guidelines on payments banks: The RBI issued guidelines for issuing licences for payments banks The move aimed at improving financial inclusion in the country will allow Pre-paid Payment Instrument (PPI) issuers, Non-Banking Finance Companies (NBFCs), corporate BCs, mobile telephone companies, super-market chains, companies, real sector cooperatives; that are owned and controlled by residents; and public sector entities to apply for a licence as promoters.
Top funding in the digital payments
– Bangalore-based point of sale solutions provider, Ezetap raised $8 million led by Helion Advisors and existing investors. The company plans to use to the funds to deploy 100,000 PoS machines in Asia and Africa. It also had a deal with State Bank of India (SBI) to deploy 500,000 PoS terminals within the next five years. SBI also partnered with Ezetap to provide a PoS solution called chotu ATM aimed at neighbourhood kirana shops.
– Ezetap also raised an undisclosed funding from American Express in return for a minority stake in the company in March. Ezetap says this will allow them to enable additional value added services like loyalty points and rewards for consumers.
– Online payment collection platform Instamojo raised an undisclosed amount of investment in a Series A round of funding from Kalaari Capital and existing investors in November. The company plans to use the funds for product development, marketing and expanding the current team across all functional areas.
– Payments technology company Financial Software & Systems (FSS) raised Rs 350 crore from Premji Invest, Wipro boss Azim Premji’s investment vehicle.The Chennai-headquartered company said that the funds will used for improving its digital payments services offered to e-commerce and m-commerce clients and remittance businesses.
– Payment solution provider Innoviti has secured Rs 10 crore funding from Tata Capital and a group of three individual investors. Of this, Rs 4 crore has been loaned by Tata Capital and the rest Rs 6 crore is from individual investors. The company will be using this investment to strengthen its operations in Middle East and for hiring.