vritti Edition 10 | March 2018 1 BLURB TRENDINGNOW WhattoExpectin DigitalPayments 2 in2018 4 MOBILUTION TheRiseofChina’s 3 CashlessSociety 10 TECHNICALLY SPEAKING MobileMoney Interoperability 14 4 CHANGINGLIVES MovingTowardsaMobileMoney 5 RevolutioninAfghanistan 22 6 INTHEMEDIA vritti October 2016 3 Blurb Dear readers, With more and more payment transactions going digital, 2018 promises to be another crucial year for growth of digital payments. We take a closer look at the growth drivers of digital payments in 2018 in the first article “What to Expect in Digital Payments in 2018” In the second article “The Rise of China’s Cashless Society” we turn the spotlight on China and explore how it is becoming the global flag bearer for digital payments economy. Next, in the article “Mobile Money Interoperability” we discuss how service providers, regulators and industry bodies are working towards achieving interoperability to realize the true potential of mobile money. And, finally, in the article “Moving towards a Mobile Money Revolution in Afghanistan” we turn our attention to Afghanistan to look at how mobile money can help in rebuilding the economy of this war ravaged country. I hope you enjoy reading our articles like we enjoy writing them for you. SrinivasNidugondi SVPandHeadofMobileFinancialSolutions Happy Reading! atMahindraComviva 4 vritti March 2018 Trending Now Trending Now vritti March 2018 5 — Srinivas Nidugondi The silly season is upon us, once again. It is, essentially, that time when one looks back and reviews the successes and failures of the previous year. It is also when one tries their hand at predicting the trends that are expected to leave the digital payments space spellbound. Or not, of course. Needless to say, if last year is anything to go by, one can safely assume that 2018 is set to witness a fair amount of activity. Now, onto the main feature… Blockchain continued to excite and evoke insurance management I see newer curiosity (and no, I am not talking about applications including contracting becoming bitcoin) in 2017 and this year promises to be mainstream. However, I believe that for small no different. Here's how-in so far, all deploy- value payments there may yet not be any major ments to date have focused on the remittances, advances. So (surprise, surprise), blockchain trade finance and insurance segment. This is everywhere data needs to be shared. year, industry experts are betting on the fact In a nutshell, the question to ask this year that the scope will widen beyond straight is-is blockchain the big disruptor for existing forward banking applications. Simply put, systems in the remittance space? We'll apart enabling international remittances, (hopefully) find out this year! 6 vritti March 2018 Trending Now Robo-advisors are just about finding their case, this technology isn't shifting out of feet in the fintech world, despite being around focus anytime soon, what with robo- for nearly a decade. Now, let's be objective- advisors under full control of AI systems what's there not to like in a software-based pegged to reach $987 billion per annum in platform performing the role of a financial assets under management (AUM) by 2022, advisor? After all, the integration of artificial as per Juniper Research. Just a brief side- intelligence (AI) into portfolio management note, this forecast refers to “hybrid” robo- software offers several advantages-both in advisors, which, as per Juniper, will dominate terms of saved time and gathering data and 66 per cent of global robo-advisory AUM in interpretation of the same. With zero human 2022. In other words, the input of a human intervention, financial services are available advisor will play a key role, primarily to mitigate at any time of the day, all based on the a customer's fears of leaving financial customer's propensity for risk in new and decisions in the hands (or design, in this existing investments. Sounds viable? In any case) of an algorithm. Ironic, isn't it? Trending Now vritti March 2018 7 Now, this is one area which witnessed a lot of activity in the past year. Wait, permit me Growth of live mobile money-enabled credit services to rephrase-I mean the small and medium enterprise and business loans side. The 52 consumer side is booming (of course), all 2016 fueled by the basic need to bring more customers into the financial fold. In so far, the story seems to have gained traction-what with 52 live mobile money-enabled credit services in 2016, up from seven services in 7 2011 2011. It doesn’t end there, of course. With AI as the backbone powering the calculation for credit eligibility criteria, rating, etc, expect this segment to make headlines. And why not? Several small players have forayed forward, emerging markets (where mobile into this field, both in the consumer and money has firmly carved a niche) are set commercial segments, with the sole purpose to witness the leveraging of mobile-based of addressing the demand for credit services. information. The bottom-line? To help in deci- Needless to say, these services have, more sions related to credit. Having said that, often than not, relied on machine learning however, players who will focus on overall and big data to assess credit risk. The result? customer engagement and leverage Better and more streamlined services to technologies including machine learning customers who need it the most! In fact, on the will lead the pack. same note, going forward, we expect to see AI is, clearly, set to play a very important role the demand increase significantly, primarily in all things mobile credit and loans-related! from enterprise customers. Going a step AUGMENTED REALITY VIRTUAL REALITY Waiting in the wings It wouldn't be an understatement to say that ever-changing, ever-evolving requirements. augmented reality (AR) and virtual reality (VR) Not just that, it could present a viable channel have transformed our world. In the financial for these players to differentiate their offerings, services space, though, it is still waiting in thereby catching (and retaining) the interest the wings. So, instead of extolling on the of millennial and younger customers. After virtues of this technology, let's examine what it all, isn't that the bottom-line? can do in this space. First and foremost, I firmly Just a quick side-note, Goldman Sachs has believe that players in then payments eco- estimated the AR/VR space to be pegged at system ought to give this technology the $80 billion by 2025. Clearly, not a flash-in- leverage it deserves. After all, it provides the-pan technology, this! ample opportunities for these players to anticipate and keep pace with the customer's 8 vritti March 2018 Trending Now Last but certainly not the least, let's talk that number has already reached 13.8 per payments. It's quite straightforward, really. cent, as per data released by the Reserve I believe that consolidation of various payment Bank of India for December. Clearly an up- systems will take place in a significant way, and-comer, this! encompassing the mobile handset, cards, On the same note, QR Codes, I believe, will online payments, in-application payments, slowly but surely find themselves in main and the whole lot. Naturally then, players who stream payments. In so far, china, India and offer a consolidated view in this regard will South East Asia has been a success story clearly have an edge over the competition. in this regard-wherein QR Codes have gained Now, let's be more specific. In the Indian significant traction. Eventually, the ambit is context, there has been a lot of buzz around expected to enhance significantly in 2018, using Aadhar for payments at physical point with markets like Africa are expected to jump -of-sales. However-and I don't mean to burst onto the bandwagon as well. Signs are already this bubble-I do not see it taking place in in place, with Safaricom launching QR codes the near future, at least. On the other hand, and mVisa and Masterpass QR pushing the the leveraging and deployment of a unified use of QR Codes in developing countries. payments interface (UPI) will continue to 2018 clearly promises to be an eventful year surge. Here's evidence to support this-as for the digital payments space. A word of per Morgan Stanley's Tracking Digital caution-while extensive lists of what will be Payments report, UPI's contribution to digital at the forefront this year are doing the rounds, payments has increased to 5 per cent (in it is still too soon to say for sure. One the second quarter of 2017-18) versus 3 thing's certain, though-the industry ought to per cent in the previous quarter and 1 per buckle up-interesting times lie ahead! cent in 2016-17. In fact, on a monthly basis, Trending Now vritti March 2018 9 Abouttheauthor:SrinivasNidugondihas over 20 years of experience in various industries including financial services, payments and commerce in a variety of business and product related roles and most recently with a specific focus on enabling banking, payments and related services through digital channels. At Mahindra Comviva he heads the Mobile Financial Solutions business unit, which currently has over 130 deployments globally, providing services for more than one billion consumers. 10 vritti March 2018 Mobilution Mobilution vritti March 2018 11 —ManojMachiraju If we look at China probably 6-7 years back, it was cash that ruled, with only a few people using cards and mobile payments. But, today, if we talk about mobile payments, the first country that comes to our mind is China. There was a swift and big jump in the way the Chinese handled their day-to-day financial transactions.