The Indian payment and banking industries have been experiencing an almost endless series of innovations over the past decade. These include cardless cash withdrawals at ATMs, Digital Wallets, Bharat QR, UPI, RuPay Card, Cash Recycling and White Label ATMs. Thanks to such advancements, both cash and digital payments have evolved at a rapid pace in the last decade.
It has also aided the growth of digital payments in the country, besides making banking services more accessible to the underserved and unserved sections of society.
The role of the banking and payment systems in our economy cannot be emphasised as it caters to financial needs across the society. Various technological advancements have led to major changes in the banking and payments landscape. So much so, doorstep banking is now not limited to only large cities, but is reaching the remotest corners of the country with the help of technology, and is further driving financial inclusion. In a way, it was inevitable as familiarity with modern technology, increase in literacy levels, globalisation, liberalisation and privatisation had all contributed to heightened customer expectations. Thanks to technology and doorstep banking, the traditional over-the-counter banking is slowly losing its prominence.
The Payments Industry has been an early adopter of technology by automating systems, streamlining operational processes and introducing innovations to further grow in the changing market environment and drive penetration. Thus, players were able to deliver the best of services to customers, which in turn, led to building up of customer confidence in new solutions – while further driving adoption and usage.
Technological advancements such as UPI, QR, Digital Wallets, Contactless Payments, Cash Recycling and Automation Technology has led to major advancements in the payments industry. Digital payment methods have witnessed massive developments in the last six to eight years, and we will see even more changes in the coming future. Be rest assured that we are only at the beginning of what will be the reinvention of payment experiences.
Some top tech innovations by the Payments Industry include:
1. EMV technology
EMV is short for Europay, MasterCard and Visa and commonly refers to a credit and debit card with a smart chip. The EMV standard is a security technology used worldwide for all payments done with credit, debit and prepaid EMV smart cards. The EMV technology brings increased security and global interoperability to card and mobile payments across platforms and devices.
The United Payments Interface (UPI) is an instant payment system developed by NPCI. UPI has been instrumental in the rapid growth of digital payments in the country, especially during COVID time, with over 2.5 billion transactions clocked during May 2021 alone. With its interoperability, ease of use and various benefits, the UPI is amongst the preferred mode of payments for customers and will further continue to drive retail digital transactions in the country.
3. Innovative POS Technologies
Along with the traditional merchant POS (Point of Sale), innovations such as NFC-based contactless POS, integrated POS for large retailers and government institutions, compact POS devices such as the mobile POS (MPOS), and Soft POS that enables merchants to accept payments via their smartphones – are transforming the digital payment experience for customers and merchants alike. Further AEPS, which uses Aadhaar authentication at POS terminals or Micro ATMs, will further drive penetration of banking services in the country.
4. Cash Recycling and Automation Technology
Innovative ATM technologies such as Cash Recycling Machines (CRMs) are not only enhancing customer convenience but driving operational, cost and staff efficiency while helping to reduce the cash in circulation. CRMs are also designed to support the Digital India initiatives by display of Bharat QR for Cardless withdrawal, soft-keyboard for data-entry of UPI transactions and Aadhaar-enabled biometric authentication.
5. QR codes
QR codes have rapidly picked up pace, especially after the demonetisation phase and with COVID-19. Many banks and merchants aggregators have introduced QR codes as part of a no-contact checkout strategy. Data loss and security breach is also minimised since the user only scans the QR. Product innovations such as UPI are equipped to facilitate QR code payments. QR codes offer a low-cost payment acceptance mode while further accelerating digital payment penetration
6. Contactless payments
Contactless payment is a secure payment method using a debit or credit card, smartcard, or another payment device by using near-field communication (NFC) technology. This is a speedy and convenient way to pay since it doesn’t require consumers to input a PIN upto a certain limit. With social distancing due to the pandemic, this method of payment has found increased takers.
7. AI and Machine Learning
Artificial Intelligence (AI) and Machine Learning (ML) are two of the most-used technologies in Fintech. Machine learning in payments is enabling banks, fintech players and payment providers to join forces and support customers in their payment preferences. Some applications of AI and ML pertinent to the payments industry include credit scoring, fraud detection and prevention, regulatory compliance, on-boarding vendors among others.
8. Cloud Technology
Most cloud hosting platforms support a variety of payments, processing and security products that allow service providers, banks and merchants to deliver speed, ease and security, thereby adding convenience, providing enhanced security of data and reducing costs to consumers
9. Biometric authentication
With the rise in the problems of identity theft and fraud, biometric authentication is emerging as a reliable and secure option for all transactions. Biometric payment through a point of sale (POS) or ATM uses biometric authentication to identify the user and authorize the deduction of funds from a bank account. The fingerprint authentication is the most common biometric payment method. With the integration of Aadhaar, this method has tremendous potential going forward.
10. Voice-based payments
Voice authentication-based services such as Voice-based banking, Voice-enabled payments, Voice-driven customer service etc. is the new frontier in how tech is transforming the payment landscape. Customers adept at using voice-based assistants will appreciate and adopt the convenience and accessibility of this technology.
With the growth of technology and the ever-changing demands of financial markets, the changes are inevitable. Each year has and will transform payments industry in a new way. These technological advancements and transformations will play a vital role in shaping the future of the payments industry in the country.
The author, Gali Kishorebabu, is Chief Technology Officer at Hitachi Payment Services. The views expressed are personal