In 2017 India has dominated worldwide news in the field of digital payments and digital identity and the trend seems still active in 2018, since over the recent weeks there have been several news and launches in India: from the launch of Google Mobile Payment services, Whatsapp, and American Express, to the addition of facial recognition to authentication services provided by Aadhaar Digital Identity services.
This attention from the media and the big international players is not a coincidence, it is the result of years of the Indian Government’s intense work, which shows a clear view of the future of payments in the Country. In fact, in 2005, the Reserve Bank of India began expressing its outlook on payments and in 2012, for the first time ever, started talking about a «less-cash society», meaning a Country in which, in addition to cash, the role of electronic payments becomes increasingly important.
Digital Identity as a payments driver
To reach its goals, India has chosen to leverage the connection between Digital Identity and payments, therefore the simplified concept “I recognize you, therefore pay”. In 2008 the Government launched Aadhaar, an identification system based on biometric data associated with a unique 12-digit code, which now counts a staggering 1.2 billion people registered (over 85% of the population). Multiple innovative payment services have been developed on this program, based on the UPI (Unified Payments Interface) protocol, another standard defined by the Government through NPCI (National Payments Corporation of India), a body established by the central bank of India to drive the transformation of payment systems. Users can therefore confirm payments through centrally registered biometric data and, news of just a few days ago, also through facial recognition. Like BankID in Sweden, Aadhaar has become an example of how a unique identification service, widespread and acknowledged at national level, may prove to be an ideal base on which to develop other successful services such as payment services launched by the NPCI.
Such initiatives promoted by central authorities have been conducted also with the aim of servicing the large number of «unbanked», that is, people that do not have a bank account.
Mobile Payments in India
A Country that is so attentive to electronic payments is an ideal breeding ground for smartphone based payment solutions. The Mobile Payment scenario in India is known to be particularly varied, with a host of services launched by organizations that are very different from one another. The Indian market is, in fact, rich with services promoted by banks, telecommunication companies, eCommerce platforms and also pure wallet providers.
Among the innovative services is Paytm, a participated company with significant investments made by Alibaba that manages 26% of all digital payment services, and for proximity payment services uses the QR code and telephone number as ID. In August 2017 Samsung also launched its Samsung Pay – based on NFC (Near Field Communication) service – and in mid-April it announced the launch of the Rewards program for users of the service. At the beginning of April American Express also released its solution based on QR code and NFC technologies.
In parallel to business company initiatives new services promoted by NPCI were also launched. Back in 2010 NPCI released the Immediate Payment Service (IMPS) that enabled making Mobile payments via text messaging. The most recent Unified Payment Interface (UPI), IMPS’ successor, is a platform open to fintechs and banks that allows free p2p exchanges between users’ bank accounts and wallets.
UPI is considered the potential game-changer of payments in India, to the point that even some international giants aiming to enter the Indian market have made changes to their solutions to adapt them to this protocol: Google, for example, launched Google Tez – a UPI based wallet that enables to pay either online or in store and make p2p transfers – in place of the famous Google Pay service. Even Whatsapp announced a few weeks ago that it has chosen India for the launch of its first Mobile Payment service: Indian users can therefore use the messaging app to transfer money and make payments. India appears to have become the ground where big international players test new digital payment solutions, facilitated by payment and identification standards promoted by the Government that make the services very efficient and also enable intercepting “unbanked” users.
More information on the relationship between Digital Identity and Mobile Payment in India and in Sweden are available in this video developed by the Mobile Payment & Commerce Observatory of the Politecnico di Milano.