The
payments landscape in emerging markets, including India, is expected to
transform in the wake of accelerating growth in electronic payments with advent
of new and disruptive market players and alternative business models, a PwC
report said.
"The
growth of economic power within the emerging markets and their potential to
leapfrog developments in mature markets will aid the creation of a
state-of-the-art payments ecosystem," multinational accounting firm
PricewaterhouseCoopers said in its report.
'Emerging Markets - Driving the Payments Transformation' examines the dynamic
nature of emerging markets, especially payments, which creates challenges that
have never confronted the developed world, but also opens up opportunities for
innovation and growth.
"Given
the underlying infrastructural issues in emerging markets, there needs to be a
focus on developing the infrastructure both for issuing and acceptance of
payments products and instruments. Alternate payment instruments and modes like
mobile wallets, virtual cards and accounts, social media and contactless
payments are gaining traction for specific use cases, especially the unbanked
customer base, driven by technology, customer needs and declining margin,"
said Vivek Belgavi, FinTech Leader, PwC India.
In India,
the new payments banks (who cannot lend but can borrow up to a limit) are
expected to start operations in 2016. Since their focus will be solely on
transactions, they will look at providing seamless transaction options for
payments of utility bills, mobile bills, and school or college fees, either
electronically or through the banking touch points they create.
At the
core of this change will be technology, which in addition to maintaining
current standards of reliability, is expected to also reduce transaction times,
improve security, increase acceptance channels (especially physical), and - in
the case of merchants - lower transaction costs, it said.
"Given
the large unbanked population and the growing regulatory agenda to engage these
people into the financial system, emerging markets are in a unique position to
drive growth in the payments industry," said Hugh Harley, financial
services leader for emerging markets, PwC.
The
report said that the payments ecosystem will also be redefined by regulatory
interventions, to balance the disruption of alternative payment service
providers with the reliability of traditional players.
Noting 85
per cent of the global population resides in emerging markets, it said that
customer expectations are driving the change in payments industry in these
markets.
"Nearly
90 per cent of people under 30, which account for 75 per cent of the online
transactions, reside within the emerging markets. This is favouring the growth
of online transactions, which is in turn curtailing the black economy and
stimulating economic growth."
It said
though literacy rates and urbanisation are on the rise, access to basic
financial services poses a major challenge in these emerging markets, and in
response, there has been a rapid expansion of new economically viable
technologies and innovations like e-banking and mobile money.
With
regulators in emerging markets realising the huge costs, risks and
inefficiencies associated with cash transactions and recognising importance of
electronic payment methods in promoting access to formal credit and savings
instruments, drastic measures like introducing differentiated banking licenses,
tax benefits on electronic payments, awareness campaigns are being taken to
build a sustainable electronic payments ecosystem, it said. Many governments
have opened their markets to non-bank players aimed at furthering financial
inclusion, it added.
With the
proliferation of smartphones and tablets, which are serving as a convenient,
cash free and card-free financial transaction medium, emerging markets are
driving the growth in e-commerce spending, and there is a rapid development of
new payment concepts based on mobile infrastructure initiated by the online
retailers.
"Banking
on high customer adoption of these models, this has the potential to displace
traditional cash with other electronic modes of payments," it said.
--IANS
