Digital payments firms in India may be the new kids on the financial block but boy are they taking banks to the cleaners. A few weeks ago, Mint reported that 30 percent of movie tickets in film-mad India will soon be purchased with mobile phones, a sum that outstrips credit or debit cards or cash. Indians are also using their phones to pay for utilities and taxis at a much greater volume than they do with cards.
As Mint reveals, banks still have a lead for in-store purchases in places like shopping malls and air tickets but even those categories are rapidly slipping away.
In other words, get ready for plastic to go the way of the SMS. The Economic Times reports that in just four months of Google launching their own payments service, Google Tez, the US firm is processing the same number of digital transactions as one of India’s top private banks — Axis, fourth overall in the payments sphere in its sector.
And just last month the Reserve Bank of India reported that transactions made through the Unified Payments Interface (UPI) — a kind of middleware that stitches all providers onto one platform for seamless interoperability and allows apps belonging to sellers to connect directly to a consumer’s bank account — was roughly half of that of all debit and credit card transactions. As the piece mentions, it took a company like Mastercard 30 years to build its business that is now being surpassed in a handful of years.
This is the power of digital payments and in no place will this have as profound an effect as in India, a country where some 700 million people have never owned either a bank account or a smartphone but are rapidly beginning to do both. Just as WeChat Pay and AliPay have become behemoths worth over $50 billion in market cap, PayTM, WhatsApp (blocked in China), Google Tez, FreeCharge, and others are poised to rise.
Watching their ascendancy helplessly will be a group of losers who will continue to be incapable of tapping into the power of digital communities, a group that should have been on this right from the get-go but haven’t — banks.
