Digital payment is a comparatively new way of life for India, but a slew of administrative initiatives over the past five-seven years have made it a very convenient option for consumers. The challenge now lies in taking digital transactions beyond the top quartile of the population, and making it acceptable at the mass-level.
The National Payments Corporation of India (NPCI), founded a decade ago, is the first major domestic player in digital payments and has constantly contributed to broadening the market. The MD and CEO, Dilip Asbe and SVP Marketing Kunal Kalawatia chat with Pankaj Joshi and R N Bhaskar about NPCI’s future plan.
How has the journey been overall? What are the challenges you can see?
The journey has been both exciting and challenging. Our mandate is to facilitate digital financial transactions growth in the country. India is a large country and with many contours, hence many different solutions are needed. On the one hand, we have customers of the do-it-yourself variety, those who are comfortable with technology. Then there are those who do have access to the technology but rely on others to carry out the process.
Then there is the third category, which relies totally on cash as the medium for transactions. We believe these segments will all continue to be part of the landscape, but along the way we will see constituents of the third category move to the second category and those from the second category will upgrade themselves to the do-it-yourself category. Smartphone proliferation, comfort of data access and gradual assurance about security standards will all aid this movement.
As an organisation, NPCI is blessed to be in the present position in the payments system. At this time, two of the biggest financial influencers—the RBI and the Government, are working towards a lesser-cash India. If we talk of challenges, it is that more innovation is being asked, so that digital payments can grow in size and market share. Consumer awareness, consumer literacy – raising these are our challenges, especially in the context of keeping track of new phishing and other methods of fraud. We cannot really talk of any growth percentage or trajectory, but the growth will be good.
What has been the aegis of NPCI?
The RBI was clear that an entity was needed to focus on the retail payments spectrum. They were also having their own operations in that area, which they were likewise keen to offload. These were the primary triggers for NPCI coming into being. However, beyond crediting the RBI for vision, it is also important to appreciate the main banking players who have been instrumental in the ground execution. If you look for corresponding cases, China had a similar structure which was created in 2004 and is doing well.
Our growth is through our 1,000-strong workforce which is constantly working on product innovation, security and acceptance. Likewise, there is a good element of crowdsourcing (ideation, new features) from key players in the financial system – banks and even fintech companies.
They are keen for NPCI to perform because they will be benefited in the long run. India’s digital payments growth is different from China in this respect. There it is a closed loop system, here the RBI has ensured an inter-operable environment which makes for equal opportunities and innovation.
How do you view the overall market and your position within it?
We do not really see the market as a finite place where we have to get market share, but rather as an entity which we have to expand. Our direction therefore comes from this vision – we want to scale up in all product lines. Much is being talked about transaction fees, but you must understand that as India moves away from its cash-dominated position and as the digital component goes up, we will automatically see charges in the market coming down.
Today we are looking at consumers as a pyramid where digital payments have just touched the top layer. We think the pyramid could, with proper market penetration and product innovation, in fact become a diamond where the middle bulge would be the growth driver.As far as NPCI goes, our fees in most cases are flat and not value-based.
Our view on this matter is not rigid, we are totally open to whatever is good for the customer, because that is where value really gets created. Consumer comfort will lead to behavioural change, which is the big challenge for the digital payments industry on the demand side. Cash has been a kind of religion and change in this mind set takes time and a lot of innovation.
For instance digital access cards across multiple forms of public transport. Such changes are necessary to transform the market. The other challenges for the sector on the supply side mainly related to ubiquity of payment systems, be it access terminals or products. How soon it can happen is the question. It is happening no doubt, but how can we accelerate the process is the question.
What are the specific steps of your strategy?
A key plank of our strategy is to liaise with merchants, have tie-ups, schemes to incentivise more activation of transactions and conversion to digital mode. In this calendar year itself, we have seen a momentum of 2 million redemptions per month, which is a key efficiency parameter.
Sourcing and communicating offers is an important activity for us, and consistent redemptions would confirm that the offers generated were relevant to the customers. Our other areas of focus are self-evident – the market seeks new products which we must deliver and likewise our existing products must get deeper and go to new markets. I
f we do not innovate and create new products, we will not survive. All activities must ultimately create value for the ecosystem, because NPCI aims to remain relevant to its key partners therein, namely the banks and the fintech companies. More scale, more relevance – that is the only way to go.