Convergence of Payment Systems
Emerging Markets - Trends &
Evolution
14 March 2016
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
2
Convergence of Payments – Shaping up the Future
Customers
Competition
Regulation
Innovation
3
• Merchants – POS
operations and settlement
• Corporate - Single Window
– Single View
• SMEs – Price Effectiveness
and ease of settlement
Business
Customer Driving the Convergence
• Internet , Mobile –
Superior Experience , Value
Added Services
• Cross Border Remittances –
Better SLAs
•Channel Hopping & Cross
Channel Processes
Mass Customer
Government
Upward Mobile
• ATM & Kiosks – Expanding
the service options
• Mobile - High availability
and Excellent Response
• Branches – Digitization of
the paper instruments
• Integration of payments
into e-Governance
• Internet - Enhanced MIS
and Monitoring Capabilities
• Digitization of Bulk
instruments & Processes
CitiTap - India
ZAP Mobile Payments –
Tanzania, Uganda & Kenya
‘E-zwich’ - Ghana
China Union Pay
Rural Smart Cards - LatAm
4
Convergence of Payments – Shaping up the Future
Customers
Competition
Regulation
Innovation
5
Regulations Facilitating the Change
Today
• Fragmented Payment
Systems
• Restricted availability of
Clearing and Settlement
window
• Lack / Multiplicity of
validation procedures
• High risk of fraudulent
activities
Tomorrow
Sistema de Pagos en
Moneda Local (Brazil
• 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
and Argentina)
East African Payments
System Harmonisation
Committee (East
African Countries)
Payments and
Settlement Systems
Act; Establishment of
NPCI (India)
6
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 !
7
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
8
Convergence of Payments – Shaping up the Future
Customers
Competition
Regulation
Innovation
9
Innovation – The Perpetual Driver
Mobile & NFC
Smart Cards
 Huge Untapped Market
 Technology to play a major role
 Quick and Convenient
 Can provide ‘Top-of-Wallet’ status
 Capable of Displacing Cash
 Suica in Japan & Octopus in HK
 Taking success of cards to the
next level
 Safe and Secure
 One card does it all
Internet
Payments
Social
Networking
 Tool for Microfinance and Financial
Inclusion e.g. Rural Smart Cards in LatAm
 Witnessing unprecedented
growth all over
 Broadened product offering such as
GiroPay, PC Pay, EPS etc.
 Comfort and Convenience
 Enhanced security- virtual keyboard,
virtual card, multi-facto authentication
 Increased time spending on
these forums
 Large reach at minimal investment
 Extend Banking Services apart
from marketing & Branding
 Apprehensions over security and
privacy
10
Convergence of Payments – Shaping up the Future
Customers
Competition
Regulation
Innovation
11
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
• Channel (Cross !) Experience is set to be a
key differentiator
 Services for Banks
: Currently at group consolidation level – white labeling likely to
emerge as a key driver for ROI
• Reusability of Payment Services will provide
opportunities of maximizing RoI
•Scalability of the servicing platforms will
provide the required foundation for
sustaining growth
12
Enterprise View of Payment Convergence
Channel
Messaging
Core
Engine
Booking /
Accounting
Clearing &
Settlement
 Expandability
 Experience
 Ease of Integration
 Flexibility
 Consolidation
 Rule Driven
 Specialization
 Value Addition
 Business Intelligence
 Technology
 Real time
 Payment Information
 Standards
 Centralization
 Scalability
 Security
 Collaboration
Building the right
business case
 Lack of standards
 Security
 Customer Adoption
 Migration
 Evolution
 Customization vs Standardization
 Scalability
 Real Time
 Integration of IT Systems
Long Term view with
Marked Quick Wins
Choosing the right
Partners
 Integration of IT Systems
 Service Levels
13
Evolving Trends in India :Rapid Growth of Electronic Payments
ECS-CR Vol
ECS-DR Vol
EFT Vol
CrCard Vol
DrCard Vol
8,000
ECS-CR Amt
ECS-DR Amt
CrCard Amt
DrCard Amt
EFT Amt
600,000
7,000
500,000
A
m
o
u 400,000
n
t
V
6,000
o
l
u
5,000
m
e
L
a
k
h
s
4,000
C
r
o
r
e
s
3,000
2,000
300,000
200,000
100,000
1,000
0
2003
0
2004
2005
2006
2007
2008
2003
2004
2005
2006
2007
2008
14
Evolving Trends in India
Mobile 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
15
Evolving Trends in India
NREGA
» 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
16
TCS Payments Expertise
Application Maintenance for multiple payments
application Development for Large Financial
Institutions
Development and
Implementation of
TCS BαNCS for
Payment Programs of
Large Financial
Instttutions
Product Development
Product
Development &
System
integration
Providing BPO
services for operations
across 21 counties
processing 150 MM
transactions annually
Early Adaptor of
standards &
technology –
SOA, XML/ ISO
20022
Application Services
Knowledge and
Thought sharing
with Industry
Specialists
BPO Services
TCS Research &
Innovation work for
new and upcoming
IT Trends
Development and
Maintenance of
Payments Clearing
Infrastructure (LVP) for
India
Participation to
Banking &
Payments forums
– EBA, SWIFT,
MPFI,
IFX
17
Thank You!
14 March 2016