Opinion: Payment players’ budget expections

As 2018 became 2019 the music is getting louder for the payment industry which has seen the dinner getting cold thanks to shock changes in regulations leading to flash crashes in net customer addition towards the fag end of the year. Usually, nothing much changes at the dawn of every year, but for the service providers in the digital payment space, the New Year has started with good tidings as the government, the regulators concerned and the related industries did address the distress in the business segment that was growing in leaps and bounds over the past years. Though it may be premature to say that once these efforts fructify the payment industry will hit a purple patch of growth, as things stand now they may well play out as the tipping points in the growth of digital payment sector of which PPIs and mobile wallets are integral parts.

The first piece of good news that came as music to the ears of the payment industry were the proposed amendments to the Aadhaar Law 2016 mooted by the government. That Aadhaar Act 2016 (Amendment Bill) and now the Indian Telegraph Act, 1885 and the Prevention of Money Laundering Act, 2002, which are now under the consideration of the Parliament and the proposed amendments to these, once notified as a law of the land, will go a long way in changing the fortunes of the payment industry which has been smarting under the Supreme Court (SC) verdict that prohibited the use of the 12 digits unique identification number for commercial purposes by private entities as it struck down Section 57 of the Aadhaar Act. It may be pertinent here to note that the amendments to the Aadhaar Act seek to broad base the definition of Aadhaar to allows private business such as banks, telecom service providers and financial entities including the digital payment service providers to use it as one of the tools to complete the ‘Know Your Customer’ (KYC) requirement for authenticating users and onboarding customers.

The second good thing to happen for the payment segment was the reported change of the mood among major card networks towards PPI service providers after the interoperability among wallets kicked in last year. The move, still in its formative stage though, allows PPI service providers to issue their own branded cards after the network integration process between PPIs and the card networks is completed.

This will go a long way in increasing the bandwidth for the PPI service providers as they will be able to issue their own branded prepaid cards after interoperability is enabled on their systems, it was said. Consumers will be able to use these cards at merchant outlets, point of sales (PoS) and for online shopping. The downside is customers cannot use these cards to withdraw money or for international transactions. However, the move will open up a whole new set of use cases for PPIs which are facing the heat from both credit and debit card providers of late. It will also enhance the probability for the digital payment service providers to spread their wings to related business and disrupt the turf of big-time financial service providers albeit operating in a co-operative framework.  However, the outcomes depend on payment providers to keep innovating and engage customers in a more efficient fashion and give them an all new experience. May these episodes provide an all new deal for the digital payment providers in the New Year.

The author is founder & managing director of tmw Fintech Pvt Ltd