As per the KPMG report on Fintech India – Powering payments, digital payments are set to grow at a CAGR of 28.8% in developing Asian countries through 2024. In India, the reception of digital payments systems has been even more enthusiastic, with the Bank of International Settlements reporting that in 2018, India had seen a 54.5% growth in digital transaction volumes, the highest among major economies. Clearly, digital payments are the future, and within a span of few years, we see most payments happening over digital platforms. Businesses of all sizes have their digital payments setup such as card payment gateways and UPI payments. At the heart of digital payments are convenience and speed. Any mode of payment which is convenient enough stands a good chance of becoming popular. Card payments with merchants gave the convenience of not having to use cash. UPI payments gave the convenience of both not having to carry cash and just pay by a few clicks, without any swipe or touch. The ability to complete a payment in a few minutes and ensuring that the receiver gets credit instantly is a major driver for the popularity of the UPI payment.
Clearly then, it is imperative that businesses adapt systems to send and receive digital payments conveniently. From the above, it is easy to ascertain how important it is for organizations to look for payment infrastructure that provides speed, convenience, ubiquity, and a guarantee of successful payments. This will help them achieve maximum customer outreach and avoid loss of business due to lack of technology adoption. The following are two aspects that your payment system must support:
Standardization of Payment Formats
Standardization of payment formats is seen as the next wave in payment modernization. When this is achieved, interoperability between payment systems will take place. Imagine funds sent from abroad through remittance channels and then instantly transferred through instant payments / faster payments to any account with any bank within the country. This is done today through specific arrangements between select banks. However, in the future, this will become commonplace through the standardization of payment formats. This would lead to rapid payments and further reduction in the cost of payment processing. Technology solutions should accommodate such a futuristic possibility by choosing payment systems that are flexible in handling message formats of different sizes and sophistication.
The biggest deterrent to speed is disconnected systems. When systems cannot communicate in synchronicity, it becomes difficult to process payments instantaneously. Therefore, all futuristic systems must have a high level of sophistication to communicate with other systems and solutions.
In the coming future, the ease of digital transactions will come to be seen as a key pillar on which brand strength would come to rest. This is because the more seamless and convenient the payment system adopted by the company, the greater would be its impression of being an innovativeness. As a result, it is worth giving serious thought about using technology differentiators as most competition, especially the new-age competition, will all be differentiated by technology, and hence they will be agile.
Mature organizations have the baggage of pre-existing technology and processes, which were built for the time and age they were implemented. Analyzing the value realized from the legacy technology could be a good place to start. If the legacy technology is already past its prime in value to the company, it is worth considering a phased retirement. Organizations need not do this in a big-bang manner. What we would recommend is segregating the technology and processes in buckets as “Quite Relevant”, “Saturated”, “End of Relevance” which could help the organizations identify the approach and priority of retirement. Again, retirement does not necessarily mean loss of value or capital investment. Almost all technology solutions today have an Opex model, making technology transitions simpler and even liberating experience.
Balaji is the co-founder and Chief Executive Officer of Evolvus Solutions Pvt Ltd. He plays a critical role in anchoring strategic priorities for the company to gain leadership position in the payments domain.