Now that, there is enough said about the pros and cons of demonetization and cashless economy and leaving behind the politics and postmortem of both the above said strategies, the business and consumers must look beyond the status quo and find business opportunities presented by a cashless society and benefits to the consumers with all the potential future products possible from these opportunities presented. Alternative payment methods may bring in business and also may provide benefits to consumers. What I have listed here is only a few known examples of major business opportunities. The opportunities are actually endless and abound. Let us take a quick review.
- A boost to Merchant Acquiring business:
A cashless economy might require to do payments using Credit and Debit cards. For processing such cards Retailers may need a Credit Card Terminal. Such Credit Card processing terminals and services are provided by Acquirers. An acquiring bank (or acquirer) is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. Acquirers enable merchants to accept card payments by acting as a link between merchants, issuers, and payment networks (Visa, MasterCard) —providing authorization, clearing and settlement, dispute management, and information services to merchants. Most banks nowadays, performs a Merchant Acquiring business. Demonetization can boost Acquirers and Banks that do Merchant Acquiring services can flourish in a digital cashless economy
2. Potential boost for Card Issuers:
Other industry that can perform well is the obvious Issuing Banks. The issuing bank is the financial institution that issues cards to consumers on behalf of the card networks (Visa, MasterCard). In simple words this is the bank who gave you the credit card. The issuing bank is hence also known as the credit or debit Card Company.
3. Further expansion of e-Commerce:
eCommerce is already a mature market in India. Snapdeal, Flipkart and Amazon has already a solid base in India. The Cashless economic model can boost this segment even more. If properly planned and executed there are opportunities in rural and lower middle class market segments. Orders can be made from mobile apps or on Kiosks kept at Community centers to place orders of Pesticides, Fertilizers and consumers can buy fresh vegetables or organic fruits directly with farm owners through personalized apps. There are lots of potential untapped market and opportunities to be realized.
4. Opportunities for Third Party Processing/Payment Gateways vendors:
A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers. A payment processor is a company (often a third party) appointed by a merchant to handle transactions from various channels such as credit cards and debit cards for merchant acquiring banks. Third Party Processor is a Bank switch that operates to process credit/debit transactions with a Network like Visa, MasterCard, AMEX, CUP etc. It provides other services like Fraud Analytics, Reports, etc. Companies providing Payment Gateways and TPP Services can benefit from the demand and potential opportunities created by a Cashless economic model.
5. Prepaid Services:
Prepaid products, stored value cards, e-Coupons, Prepaid cards, and services are ideal for parents who wish to give their kids pocket money and still can monitor or have an audit over their expenditures. Prepaid gift cards and Prepaid (debit/credit) cards are also very ideal for tours, travel and gifts without major risks. In situations of cashless economy, people who travel, or payments of lesser amounts, and people who want secure way of carrying money can benefit from this. Prepaid cards with PIN or OTP or Biometrics or a simple Photograph embedded in the reloadable prepaid cards can be a perfect secured solution for Indian consumers. Limiting the number of cards a person can have by tying it to PAN and Adhar cards and limitation in the amount that can be used per day or top-up value it can have will prevent fraudulent activities like money laundering. Possibilities and potential are endless!
6. Terminal Vendors:
A payment terminal, also known as a point of sale terminal, credit card terminal, EFTPOS terminal or a PDQ terminal, is a device which interfaces with payment cards to make electronic funds transfers. Sagem, Hypercom terminals are abound in international markets. Indian companies and brands can grab the opportunities presented for Indian market and international companies can bring in their experience and products into this new market demand created by the government strategy.
7. Opportunities in “Payment as a Service” business model:
Payments as a service (PaaS) is a phrase used to describe a software as a service (SaaS) to connect a group of international payment systems. Debit and Prepaid Cards Global Bank Transfer, International and Local eWallets are all example services. PaaS is designed to allow merchants and other market participants to utilize local, regional and global payments options through a single interface. The complexity of moving funds between providers is handled by the PaaS layer and is hidden from the user. Abundant opportunities are presented in the current scenario for Indian financial services companies and IT companies to implement such a service model.
8. Financial Risk Management/Credit Management Services
Credit management consultancy will flourish in an ideal cashless economy. Credit management is the process of controlling and collecting payments from customers. Setting credit limits, setting credit terms, setting credit-rating criteria, Troubleshooting problem accounts are all done by the Financial Risk Management consultants.
9. GIRO:
Giro or Giro transfer, is a payment transfer from one bank account to another bank account and instigated by the payer, not the payee. In countries like Singapore and some European countries GIRO is associated and similar to the modern Bill payments. GIRO helps you pay regular bills (like monthly bills). It allows the billing vendor to debit your designated bank account to pay your bills. For example, you may wish to pay your utility bills via GIRO. In this case, the billing vendor will be Singapore Power Services. As a consumer if you sign up for GIRO payments of your monthly PUB (Water, Electricity bills) or School fees, or other essentials, the payments will electronically and automatically happen every month on a designated date and from your designated bank account. You don’t have to worry about queuing in office, forgetting bill payment deadlines, Carrying cash or paper cheque that can be lost, stolen, or forgotten. In the United States, the Automated Clearing House (ACH), regulated by NACHA and the Federal Reserve Bank, handles all such interbank transfers, including direct deposit and direct debit.
10. Dynamic Currency Conversions:
Dynamic currency conversion or cardholder preferred currency is a financial service in which credit card holders, when making a payment in a foreign country, have the cost of a transaction converted to their home currency at the point of sale. When a tourist travelling from USA and doing payments using his credit card, DCC gives an option to make the payment in his home currency USD or Indian currency INR by auto detecting the home country of the credit card. Another variant is the Multi Currency pricing in eCommerce websites where you are in India for a tour from a European country and want to book a hotel room in Singapore. Multicurrency pricing will let you choose the currency automatically based on your card, location from where you book and the location of the hotel you are booking. This type of payments will require financial planning and forex hedging. Cashless economy will boost Credit Card Payment sector which will also boost the DCC or Multicurrency services which will also increase transactional banking and hedging services multifold. Related services like Forex vendors, Hedging etc. can complement these services.
11. Business Analytics:
Business Analytics include variety of processes including data warehousing, business intelligence, enterprise information management, business performance management, analytic applications, and governance, risk, etc. Increase in online payments, credit card payments and retail payments may help to boost Business Intelligence and Cloud analytics industries to a greater extent. The information thus sought may help in designing marketing programs, loyalty programs, sales strategy planning etc.
12. Rewards/Loyalty programming:
Credit Card Rewards, Loyalty marketing services in payment industry has a lot of potential to flourish in a Cashless economy. Loyalty promotions, redemptions will benefit both the consumers and Credit card processors as well as the retailers.
13. Smart Card Vendors and EMV Solutions:
Imagine. A nationwide Contactless stored value ticket for use on the Trains, buses which can also be used to pay for the car parks, Toll fees in Highways etc. which can help remove cash from various uses and mode of transportation. Smart cards can be used in Loyalty cards as well as prepaid coupons. As most Smart Cards carries a Chip nowadays, there will be a huge demand for EMV Solutions.
14. Mobile Computing/Mobile wallet App Developers
A digital wallet refers to an electronic device that allows an individual to make electronic transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. An individual’s bank account can also be linked to the digital wallet. Google Pay, Apple Pay etc. are some examples of mobile payment and digital wallet. An NFC enabled wallet can also trigger use of Smart Phones and Smart Phone industry to higher extent.
15. Mobile Banking/Online Banking
Mobile Banking includes lots of banking services including over the counter services like Account Information, time-critical transactions, Funds transfer or Wire transfer, Remittance services, Loans and Payments etc. A Mobile Banking or Online Banking websites have a large potential for growth and innovation in days to come.
16. Peer-to-Peer payments
Peer to peer payments are the easiest and fastest way to transfer money from person to person with a smartphone. Imagine this situation. You suddenly remember that you have left your wallet at your place in the coffee shop. Let your friend pay and transfer her/him the money through your mobile in a simpler way. Just select his number in the app and enter amount and the transfer is done. Transfers made as such can be a limited amount per day to ensure enough protection in case of loss of phone or misuse by others. Such Apps and vendors are big needful for a cashless economy. Examples of such Apps and tools are Square Cash, PayLah etc.
17. ATMS, Payment Kiosks, Self Service Point of Sale Kiosks etc.
ATM Manufacturers, Self Service Kiosk vendors can benefit a lot from the Cashless society can benefit. Easy ticket vending machines in railway stations, self-payment counters in post offices, telecom officers, government offices etc. can benefit citizens a lot. Same applies for the retail segment which can install self-service kiosks to lessen manpower and cut short queues. There is a huge untapped potential for this segment in India in near future.
18. Mobile Charging (Billing on Behalf) and Payments
eCommerce through mobile or simply mobile commerce has opened door for other type of payment models as well. Postpaid or even prepaid mobile services from ISP or Mobile operators can be extended to make payments for online purchases. The payments can simply be made on the prepaid credit left for your mobile line or to the postpaid bill.
19. Datacenter operations, ISP Managed Services, (NOC, MPLS, Storage, Backup, IT remediation, DR / HA solutions etc.)
An increase in digital payments both online and mobile can seriously impact the infrastructure and a tech refresh may be needed for many banks and other operations. This include data center revamps, need of HA or DR solutions, revamp security, increase in demand for NOC, Firewall or MPLS connectivity. The same applies for Networking, ISDN and Telecom Service providers. There will be a great demand and increase in such services.
20. Payment Card Industry Data Security Standard
A demand for PCI – training, PCI Certifications and audit may increase due to the increase of use of Credit Cards and Card processing industries. There is a great opportunity for third party service provides and PCI partners and educators.
21. IT and Transactional Security (Biometrics, Digital Security through – Encryption and Tokenization, Key Management):
Key management, digital tokens, Cryptographic algorithm vendors can benefit hugely by coming out with innovative solutions for the online banking, mobile payments etc. Also adding an element of biometrics to the mobile funds transfer, ATMs, laptops etc. can also be an additional security layer for such digital transactions. Biometric vendors, Key Token providers can utilize the demand in the market for such products.
22. Payment Aggregators:
By definition, Payment Aggregators are service providers through which e-commerce merchants can process their payment transactions. Aggregators allow merchants to accept credit card and bank transfers without having to setup a merchant account with a bank or card association. It is time to have standard big players in payment aggregator business since small and medium scale retailers and online merchants can benefit with such providers.
23.Support Services (Financial Settlements/Reconciliations/Audits/Fraud Prevention/Analytics/Hedging):
Support services include a variety of financial and transactional services for retailers and bankers, they provide front end or backend processing services. Front-end processors have connections to various card associations and supply authorization and settlement services to the merchant banks’ merchants. Back-end processors accept settlements from front-end processors and, via The Reserve Bank for example, move the money from the issuing bank to the merchant bank.
24. BIT Coin and other alternate payment methods:
Alternative payments have a growing market in other parts of the world. For instance Bit coin is one. Bitcoin system is peer-to-peer and transactions take place between users directly, without an intermediary like a bank. Otherwise it presents some opportunity for alternate payment modes. In 2015, the number of merchants accepting Bitcoin exceeded 100,000. Big companies including Microsoft, Paypal and Dell now accept Bitcoins.
Apart from the above mentioned selected few Industries that can benefit Large Enterprise Retail, SMB Retail, Petroleum and convenience, Restaurants and Hospitality, Retail Banking, Healthcare, Government Services, Transportation and Taxi, Mobile developers, and Information Technology Sector can all benefit from alternative payment methods. Maybe it is time to revisit use of Money orders, cheque and demand drafts and see how to convert the conventional payment methods into digital. There are huge challenges in infrastructure, educating the public to use such alternative payments and transaction methods but business and consumers must see it as an opportunity rather than as a mere risk or challenge. Where there is a risk, there is also a mitigation and the contingency itself may present a new opportunity. For every problem presented, one must not forget that there is more than one solution to the problem. People must also be ready to move on and embrace the future and business and industry partners should take up the responsibility of seeding in confidence to the people.
Big ideas! Big dreams! 