The second day of Global Fintech Fest 2024 continued to showcase groundbreaking insights and innovations in the fintech sector. Attendees witnessed engaging panel discussions featuring industry leaders from across the globe. At the ‘Driving Trends in Payments’ panel, Vishal Dalal, CEO of International Markets at Pismo, shared important insights into the emerging trends of payments.
Tracing digital banking’s path to prominence
Digital banking has dramatically changed over the last 20 years. Initially, it aimed to reduce the expenses of branch-based transactions by moving them online, but today it has evolved into a sophisticated financial services ecosystem.
Digital banking was primarily viewed as a cost centre in the early days. Banks focused on moving transactions to self-service modes, gradually expanding to customer acquisition through Internet and mobile banking platforms. The first mobile banking application was launched in 2008, followed by the Reserve Bank of India’s (RBI) mobile banking guidelines in 2009. This period laid the foundation for retail payments in India.
The late 2000s saw a surge of interest from telecom players in the financial sector. Companies like Vodafone, inspired by the success of M-Pesa in Kenya, sought to enter the Indian market. Banks formed partnerships with these telecom giants, creating prepaid instruments and savings accounts where telecom players provided the access channel while banks held the accounts.
A significant milestone in this journey was the launch of Immediate Payment Service (IMPS), which enabled fund transfers within seconds, igniting excitement in the digital payments space. The introduction of Aadhaar further simplified customer and merchant onboarding processes, paving the way for more innovative solutions.
UPI and transformation: Redefining the payment landscape
The launch of the Unified Payments Interface (UPI) signalled a new era in Indian digital payments. UPI, primarily a mobile-based fund transfer mechanism, revolutionised the payment ecosystem by redefining banks’ roles. Before UPI, mobile banking services were bank-dependent.
UPI changed this by enabling fintech companies to become Payment Service Providers (PSPs) or Third-Party Application Providers (TPAPs). This allowed fintechs to offer tailored payment experiences whilst banks operated in the background.
Driven by the National Payments Corporation of India (NPCI), UPI’s growth has minimised reliance on traditional banking channels for everyday transactions. Its success lies in solving real-world problems and adding value to the ecosystem. Both banks and fintechs are now integrating these innovations with businesses through API technology and other integrations.
UPI and PIX: Pioneering instant payment systems
India’s UPI and Brazil’s PIX have revolutionised instant payment systems, transforming their financial landscapes. These systems have strengthened national ID systems and promoted financial inclusion. India started with universal access and later added credit features, whilst Brazil began with bank-based access and is expanding its scope.
The success of UPI and PIX has inspired global innovation, with other regions adopting similar systems. As Vishal Dalal notes, “India and Brazil will be recognised as pioneers and leaders in this space.”
Their achievements have set a benchmark for transforming economies and societies through innovative payment systems.
Emerging trends in payments: Insights from Global Fintech Fest 2024
At the ‘Driving Trends in Payments’ panel held on 29th August during the Global Fintech Fest 2024, industry leaders discussed key trends shaping the future of payments:
- Cross-border interoperability: UPI’s global expansion is enabling seamless transactions for Indian travellers abroad.
- E-commerce growth: With India’s e-commerce exports at just 1% of merchandise exports, there’s immense potential for growth.
- Regulatory support: Dynamic regulations in India are encouraging digital payments and enabling e-commerce expansion.
- B2B opportunities: Cross-border trade presents a significant growth area for digital payment solutions.
- Cloud adoption: The cloud is becoming increasingly crucial for payment infrastructure, offering improved speed, strength, and safety.
- Remittance corridors: UAE-India and Saudi-India remain the top remittance routes, with room for improvement in convenience and speed.
The panel emphasised that payment systems reflect a country’s aspirations, with India and Brazil leading the way. The journey from cross-border to borderless commerce remains a long-term goal, with ongoing experiments and bilateral solutions paving the way forward.
Future outlook: A vision for the next five years
Vishal also shared his insights on the future of payment systems. He emphasised that certain elements are likely to play crucial roles in shaping the payment landscape over the next five years:
- Cloud technology: Expected to become increasingly prevalent, offering improved speed, strength, and security.
- API as a global common language: Anticipated to evolve, becoming faster and more robust.
- End-user devices: With smartphone penetration reaching 66-67%, the share of feature phones is expected to decline further.
- Architectural design: Bold approaches in system architecture will drive growth and innovation.
Vishal also highlighted the potential for experimentation in country-to-country, point-to-point solutions, which could significantly impact cross-border transactions. He noted that while the journey from cross-border e-commerce to truly borderless commerce is long, it presents substantial opportunities alongside regulatory and compliance challenges.
As the payment industry continues to evolve, the interplay between these trends and emerging technologies will likely shape the future of financial transactions, potentially transforming how we conceptualise and implement payment systems globally.
