April 19, 2023
Convergence of Payment Systems
Emerging Markets - Trends & Evolution
2
Payments in Emerging Markets – Setting Up the Pace
•Modernization of Payment Systems • Payment Systems at the heart of financial growth• Inclusion approach on Banking • Risk Management • Increased Govt spending on Infrastructure
• Growth of The Banked • Over 3 crore no-frills account opened in 3 years • Adoption of electronic payments by the mass customer
• Debit Cards - 50% CAGR in India over last 5 years
• Growth fueled by New Channels •Increased e-commerce activities
• 80% CAGR in Internet based Payments over last 5 years•Mobile Banking & Payments
• Mobile Payments across the world expected to double in 2 years
• Innovation in Market place • Mobile: M-PESA• P2P Payments opening by Non Banks
3
Convergence of Payments – Shaping up the Future
Com
petiti
on
Regulation
Customers
Innovation
4
Customer Driving the Convergence
• Merchants – POS operations and settlement • Corporate - Single Window – Single View • SMEs – Price Effectiveness and ease of settlement B
usin
ess
• ATM & Kiosks – Expanding the service options • Mobile - High availability and Excellent Response • Branches – Digitization of the paper instruments
Mass Customer
• Internet , Mobile – Superior Experience , Value Added Services • Cross Border Remittances – Better SLAs •Channel Hopping & Cross Channel Processes
Upward Mobile
• Integration of payments into e-Governance• Internet - Enhanced MIS and Monitoring Capabilities • Digitization of Bulk instruments & Processes
Gov
ernm
ent
CitiTap - India
ZAP Mobile Payments – Tanzania, Uganda & Kenya
‘E-zwich’ - Ghana
China Union Pay
Rural Smart Cards - LatAm
5
Convergence of Payments – Shaping up the Future
Com
petiti
on
Regulation
Customers
Innovation
6
Regulations Facilitating the Change
• Fragmented Payment Systems
• Restricted availability of Clearing and Settlement window
• Lack / Multiplicity of validation procedures
• High risk of fraudulent activities
Today
• Centralized and Inter Linked Payment Systems
• 24 X 7 availability for low value payments
• Standardization of Identification & Validations
• Increased Electronification of Payments , Centralized databases to reduce risk of Frauds
Tomorrow Sistema de Pagos en
Moneda Local (Brazil
and Argentina)
East African Payments System Harmonisation
Committee (East African Countries)
Payments and Settlement Systems
Act; Establishment of NPCI (India)
7
RBI Vision of Payments in India
• Payment and Settlement System Act 2007 • Set up of NPCI • Promotion of electronic modes of payments• India Money Line , India Card , Centralized ACH
• Increased responsibility on the Banks for enhancing the Payment Networks – Banks are in the centre of all transactions
• Aligning the strategic objectives around Payments – Reusability of Payment Services across business functions
• Strategic review of Payment Systems inside the banks and preparing for the future world of non stop payments – faster , easier and cheaper !
8
Financial Inclusion
• Introduction of ‘no-frills’ accounts • Freeing up of Bank branches and ATM expansion• Allowing various entities to act as Business Correspondents• Simplified KYC norms
• Strong focus on financial education and financial inclusion as market opportunity is recognized by most banks
• Initiatives to drive down costs through infrastructure sharing and technology innovations
• Strategic review of current business models to ensure the hurdles of last mile connectivity are done away with
9
Convergence of Payments – Shaping up the Future
Com
petiti
on
Regulation
Customers
Innovation
10
Innovation – The Perpetual Driver
Mobile & NFC
Smart Cards
Internet Payments
Social Networking
Huge Untapped Market
Quick and Convenient
Capable of Displacing Cash
Technology to play a major role
Can provide ‘Top-of-Wallet’ status
Suica in Japan & Octopus in HK
Increased time spending on these forums
Extend Banking Services apart from marketing & Branding
Large reach at minimal investment
Apprehensions over security and privacy
Taking success of cards to the next level
One card does it all
Safe and Secure
Tool for Microfinance and Financial Inclusion e.g. Rural Smart Cards in LatAm
Witnessing unprecedented growth all over
Comfort and Convenience
Broadened product offering such as GiroPay, PC Pay, EPS etc.
Enhanced security- virtual keyboard, virtual card, multi-facto authentication
11
Convergence of Payments – Shaping up the Future
Com
petiti
on
Regulation
Customers
Innovation
12
Defining the Competitive Landscape
Acquisition : Merchant Services & ePayment Gateways - P2B and B2B business, tremendous opportunity for brand building and increasing retail customer base
Corporate & Business : Accessibility through channels with minimal user intervention, Wide Coverage, Extensive reporting & alerts and capability to Provide Single Window Service SMEs : Wide distribution , Availability of easy to use channels, Introducing new services in collaboration with MSPs, Faster Settlement Services for Banks : Currently at group consolidation level – white labeling likely to emerge as a key driver for ROI
• Channel (Cross !) Experience is set to be a key differentiator
• Reusability of Payment Services will provide opportunities of maximizing RoI
•Scalability of the servicing platforms will provide the required foundation for sustaining growth
13
Enterprise View of Payment Convergence
Expandability Experience
Scalability Security Collaboration
Channel
Messaging Ease of Integration Flexibility
Lack of standards Security Customer Adoption
CoreEngine
Consolidation Rule Driven Specialization Value Addition Business Intelligence Technology
Migration Evolution Customization vs Standardization Scalability
Booking / Accounting
Real time Payment Information
Real Time Integration of IT Systems
Clearing & Settlement
Standards Centralization
Integration of IT Systems Service Levels
Building the right business case
Long Term view with Marked Quick Wins
Choosing the right Partners
14
Evolving Trends in India :Rapid Growth of Electronic Payments
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2003 2004 2005 2006 2007 2008
Volume
-
Lakhs
ECS-CR Vol ECS-DR Vol EFT Vol CrCard Vol DrCard Vol
0
100,000
200,000
300,000
400,000
500,000
600,000
2003 2004 2005 2006 2007 2008
Amount
-
Crores
ECS-CR Amt ECS-DR Amt EFT Amt
CrCard Amt DrCard Amt
15
Evolving Trends in IndiaMobile Phone based Payments» Deep penetration of mobile phone across
social and economic status» Recognized as a feasible model for financial
inclusion owing to coverage and low cost» India has adopted the ‘Bank Led Model’ » Regulations like KYC, AML, CFT and STR apply» Transaction amount limits applicable
Pre Paid Cards• Another channel to mobilize financial
inclusion• Can be used within the existing card network• Expandable to other technologies like internet
wallets, smart cards etc• Regulations like KYC, AML, CFT and STR
apply• Loading limits applicable
India Post
Collaboration between Banks and India Post exists for financial inclusion. However• India Post aims to computerize and network all post offices by 2011-12• Will aggressively seek for MOUs with State & Central Government for social security schemes• Aims at 100% increase in revenue from financial remittances and 50% increase in revenue
from savings accounts by 2012• Targets financial inclusion growth of 10% in the next 5 years
16
Evolving Trends in IndiaNREGA
»Coverage : all districts, 3 Cr households
»Challenges in Payment transparency»Last mile IT reach not available»New payment methodologies being
explored
Fertilizer Subsidies
• Direct payment to farmers
• New process and modalities have not been finalized
• Strong possibility for all such government payments to finally gravitate to a common platform
Other Game Changers
• NPCI - Retail payments
– Consolidation of various retail payment systems. Creation of national ACH
– Introduction of India 24 x 7 for faster and round-the-clock funds realization
• Strong drive for financial inclusion
• UID Introduction
17
Development and Implementation of TCS BαNCS for
Payment Programs of Large Financial
Instttutions
Application Maintenance for multiple payments application Development for Large Financial
Institutions
Providing BPO services for operations
across 21 counties processing 150 MM
transactions annually
TCS Research & Innovation work for new and upcoming
IT Trends
Development and Maintenance of
Payments Clearing Infrastructure (LVP) for
India
Product Development &
System integration
Early Adaptor of standards & technology –
SOA, XML/ ISO 20022
Knowledge and Thought sharing
with Industry Specialists
Participation to Banking &
Payments forums – EBA, SWIFT,
MPFI, IFX
TCS Payments Expertise
Product DevelopmentProduct Development
Application ServicesApplication Services
BPO ServicesBPO Services
April 19, 2023
Thank You!