Plastic money: The next stop

India is a young nation with over 700 million people under 35 years of age. This generation spends a lot of time on mobile phones and on the internet, and prefers services that are instant and convenient. Over the last decade, the Indian banking sector has made immense progress in the field of technology and innovation to cater to the needs of this ‘tech-savvy’ generation. ICICI Bank has been quick to leverage the technology innovations taking place around the world, adoptthem in our services and customizethem to suit our customers’ needs. 

Demographics is not the only factor driving growth in technology-enabled banking. The growing penetration of smartphones has made technology applications much more accessible to users. Further, the Government’s push for a “Digital India” and its focus on growing electronic payments are important drivers of growth in replacing physical payments with technology-backed solutions. All these factors put together will catalyze the usage of non-cash based payment mechanisms in the country.We are at the cusp of a tectonic shift towards electronic money from traditional cash.

In fact, this shift is already underway. The Pradhan Mantri Jan DhanYojana (PMJDY) for instance, is slowly building acceptance among people to move from paper to electronic money. The PMJDY alone has seeded over 150 million Rupay cards in the last year, in addition to the 400 million debit cards already in circulation. We expect that there will be a significant increase in the usage of debit cards in the years to come as card acceptance infrastructure will witness a major expansion in smaller towns and villages.

We also foresee a large expansion in avenues of acceptance of credit and debit cards for services rendered by government departments and utilities. This will usher in better customer service, electronic accounting, improvement of government service delivery and efficiency & productivity gains in many of these areas. 

Electronic transactions have also become more secure. The introduction of second factor authentication for credit and debit card transactions has made ecommerce safer.  This second factor authentication process for card-based transactions will evolve further with large scale adoption of biometrics-based authentication systems.Fingerprint scanning hardware in smart phones will become omnipresent with features like Touch ID from Apple and the proposed finger print scanner APIs on the Android M operating system. Thus, authentication of ecommerce transactions will become seamless and more convenient. 

Finally, we believe that the smartphone will start occupying center place as the preferred point of sale (POS) payment instrument. Contactless payments will also take off in a big way in India. Credit and debit cards would be directly added onto the Near Field Communication (NFC)-enabled mobile phones of customers that will be used at contactless terminals. A majority of small ticket transactions will take placethrough the contactless mode and the need to pay using a plastic card will slowly diminish. In fact, we foresee that plastic cards willslowly phase out in the next 10-15 years as smartphone based proximity payments gain more and more currency.

We believe that the next five years will be a very exciting period in the payments space in India. Onecan expectmore development, innovation and infrastructure building coupled with adoption of more dynamic technological innovations.  India is one of the world’s fastest growing economies. The country’s robust demand growth will necessitate the need for quicker, simpler, frictionless payments and we will see not only a shift from cash to electronic payments but newer modes of electronic payments growing and replacing existing technologies.