Payments Industry

Analysis to identify blue ocean opportunity in Payments

Industry for a service company

Presented by: Aniket Harsh

The Digital Payments Industry- Agenda

• Ecosystem
1. Composition
2. Players
3. Indicators of Explosive Growth
• Market Sizing
1. Transaction Trends
2. Insights
• Aiming at Financial Inclusion
1. Overview of Banking Services
2. Infrastructure Analysis
3. Policies and schemes to increase financial inclusion
4. Insights
• Technology Trends and Disruptions
• SWOT Analysis
• Service Lines
1. Scope of service
2. Competitive landscape Digital Marketing and Digital Transformation
3. Competitive landscape Analytics and Data Services
4. Competitive Landscape Insights
• M2M Payments and IoT
1. Market Size and Outlook
2. Trending First Movers
The Digital Payments Industry- Ecosystem
1. Composition
The Digital Payments Industry- Ecosystem
2. Players

Wallets

Internet + Mobile
Banking (with UPI) +
Cards

Payment Services
and Gateways

Payment Banks

Payment Networks
The Digital Payments Industry- Ecosystem
3. Indicators of explosive growth
The Digital Payments Industry- Market Sizing
1. Trends in Transaction

RTGS
Revenue Opportunity TRANSACTION VOLUME IN MILLIONS
2014 (A)
85.29
2015 (A)
92.87
2016 (A)
98.94
CAGR
5%
2017 (E)
103.95
2018 (E)
109.23
2019 (E)
114.77
2020 (E)
120.59
NEFT 852.89 1,153.85 1,481.38 20% 1780.70 2140.50 2573.00 3092.89
IMPS 52.13 179.93 389.48 95% 761.40 1488.50 2909.93 5688.72
Cards (Credit + Debit) POS 1,327.08 1,804.26 2,754.57 28% 3513.76 4482.20 5717.55 7293.39
m Wallet 187.86 550.61 965.10 73% 1665.27 2873.41 4958.04 8555.05
Mobile Banking 141.62 308.84 767.54 76% 1348.21 2368.20 4159.84 7306.95
TRANSACTION VALUE IN INR BILLIONS
2014 (A) 2015 (A) 2016 (A) CAGR 2017 (E) 2018 (E) 2019 (E) 2020 (E)
RTGS 605,350.96 676,957.62 802,345.14 10% 881,344.89 968,123.0 1,063,445.45 1,168,153
NEFT 54,455.64 75,262.18 106,103.90 25% 132,523.89 165,522.4 206,737.77 258,215.7
IMPS 373.51 1,319.31 3,106.91 103% 6,295.12 12,754.98 25,843.73 52,363.73
Cards (Credit + Debit) POS 2,953.63 3,759.72 5,285.93 21% 6,417.66 7,791.69 9,459.90 11,485.29
m Wallet 58.20 165.89 375.10 86% 698.05 1,299.06 2,417.53 4,498.96
Mobile Banking 627.11 2,909.79 10,089.95 152% 25,472.45 64,306.15 162,343.27 409,841.6
PER TRANSACTION VALUE IN INR
2014 (E) 2015 (E) 2016 (E) 2017 (E) 2018 (E) 2019 (E) 2020 (E)
RTGS 7,097,560.79 7,289,303.54 8,109,411.16 8,477,791.28 8,862,905.52 9,265,514.06 9,686,411.60
NEFT 63,848.37 65,227.01 71,625.04 74,422.32 77,328.85 80,348.89 83,486.88
IMPS 7,164.97 7,332.35 7,977.07 8,267.73 8,568.99 8,881.22 9,204.82
Cards (Credit + Debit) POS 2,225.66 2,083.80 1,918.97 1,826.43 1,738.36 1,654.54 1,574.75
m Wallet 309.81 301.28 388.66 419.18 452.10 487.60 525.88
Mobile Banking 4,428.12 9,421.67 13,145.83 18,893.44 27,154.01 39,026.25 56,089.27

ESTIMATED REVENUE IN INR

2014 (E) 2015 (E) 2016 (E) 2017 (E) 2018 (E) 2019 (E) 2020 (E)
RTGS 257,286,578.7 264,237,253.42 293,966,154.4 307,319,933.7 321,280,325 335,874,884.77 351,132,420
NEFT 758,199.45 774,570.69 850,547.34 883,765.07 918,280.10 954,143.10 991,406.72
IMPS 71,649.72 73,323.51 79,770.72 82,677.34 85,689.88 88,812.18 92,048.25
Cards (Credit + Debit) POS 29,536,300,000 37,597,200,000 52,859,300,000 64,176,571,677.9 77,916,891,679.2 94,599,039,029 114,852,864,282
m Wallet 1,746,000,000 4,976,700,000 11,253,000,000 20,941,591,258 38,971,851,456 72,525,778,350 134,968,915,481
REVENUE IN INR BILLIONS 31.54 42.84 64.41 85.43 117.21 167.46 250.17
The Digital Payments Industry- Market Sizing
2. Insights
Payments Industry in India will have
an estimated revenue of INR 250
billion by 2020 through transaction
charges levied on merchants for
POS, and transfer charges levied on
transferor.
Per transaction value shows a
decreasing trend for Cards
indicating increase in card based
transactions in lieu of cash
transactions at POS.
By 2020, m-wallets will be the
preferred medium for digital
transaction, surpassing Cards and
others in volume
90% of revenue will go to
credit/debit card issuing institutions
and m-wallet companies, through
MDR (Merchant Discount Rate)
charged to merchants during POS
transactions.
M-wallet supersedes Mobile banking in
number of transactions by ~ 20%.
However, an analysis of per transaction
value of m-wallet indicates an increased
usage for small expenses and validates its
positioning as a replacement for small
cash based transactions. On the other
hand, analysis of per transaction value of
mobile banking indicates that it will be
preferred for large value transactions
moving towards replacing web based
online banking as the preferred medium
for banking.
UPI and peer to peer transactions pose a
high risk to m-wallets and cards as it
makes account to account transfer
instantaneous, seamless and as
convenient as m-wallet/cards usage.
Biggest advantage of UPI is that it is free
(or practically free, there will be a
proposed fee of INR 0.5 per transaction
levied on transferor) instead of MDR
(which ranges from 0.75% to 2% of
transaction value levied on merchant)
which should make it preferred
instrument for use by merchants big and
small.
The Digital Payments Industry- Aiming at Financial Inclusion
1. Overview of Banking Services
The Digital Payments Industry- Aiming at Financial Inclusion
2. Infrastructure Analysis

Customer Serving Cost per channel

The Digital Payments Industry- Aiming at Financial Inclusion
3. Policies and schemes to increase financial inclusion (Digital India 2020)

National Payments Commission of India Reserve Bank of India

JanDhan Yojana Payments Bank

UPI
Reduction of MDR

RuPay KYC Relaxation for small

transactions
IMPS
Aadhar based KYC

*99#
Tax Rebate on accepting digital
payments
Aadhar Enabled Payment
System Simplified Branch Authorisation
Policies
Bharat Bill Payment System
Compulsory opening of bank
branches in unbanked villages
The Digital Payments Industry- Aiming at Financial Inclusion
4. Insights

Banking the unbanked is a primary policy objective to stimulate

economy development and closing the income disparity.

India fares poorly when it comes The customer serving cost in

to global average of: conjunction with time and cost
- ATMs per 100000 people (India requirement to bridge the gap in
19.71:Global 40.554) and global average using traditional
- Banks per 100000 people in infrastructure heavy model is an
rural areas (India 7.8:Global unenticing proposition
12.63)

Financial Inclusion through Digital enablement- DIGITAL INDIA

Payment Banks Internet & mobile Penetration Innovation Easing Regulatory Env.

ENABLERS
The Digital Payments Industry- Technology Trends and Disruptions

Payments Processing will undergo transformation for building Next Generation

Infrastructure. Siloed Legacy systems are hampering ability to respond to
challenge posed by innovation at Non Banks

Blockchain for increased security. Many participants are evaluating Blockchain to

reduce execution time, making it more transparent and secure

Payment service providers will increase focus on leveraging insights and data to
offer value added services. With increased competition, there is a need to
increase customer stickiness and life time value.

Increased investment in security and authentication measures to avoid Fraud and

data breaches

P2P payments reduces steps and eliminates multiple payment charges. Highest
impact will be to card networks (Visa, MasterCard and Amex)

SMS and Web Chat payments and Near Field Communication enabling Greater
convenience and financial inclusion in remote places with limited internet
connectivity

Integration of IoT and Payments creating a commerce for every device

The Digital Payments Industry- SWOT Analysis
Strengths:
- Strong Government backing
- Regulatory Support
- Highly skilled talent pool for innovation
- Positive Venture Capital sentiment drawing
investment for growth
- Mobile and low cost internet penetration
- Scalable Technology allows quick and low
cost onboarding.
Opportunities
- Huge untapped market with 60% not having
access to internet and 90% not having a smart
phone
- Chance to Shape consumer behavior using
analytics
- New Technology IoT and AI
- API-fication
- New Innovations in Payments like Near Field
Communication, Web and SMS paytments
Weakness:
- Low Financial Literacy
- Merchant acceptance in rural areas
- Unreliable internet connection in rural
areas
- Inertia to adoption due to tax evasion or
security concerns
- Legacy Architecture
- Low margins
- Absence of infrastructure, laws and
regulation incase of fraud
Threats
- Customer Loyalty and sustained
engagement
- Price wars/cashbacks hurt ecosystem
- Transaction and customer data Security
- New innovations like P2P payment
platforms, UPI
The Digital Payments Industry- Service Lines
1. Scope of service
Digital Marketing and Digital Transformation Analytics and Data Solution

• Target Segment- Banks, payment banks, • Target Segment- Banks, payment banks,
mobile banking, m-wallets, Retail and mobile banking, m-wallets, Retail and
merchants merchants
• Scope of Services - • Scope of Services -
- Omni channel marketing management - Data driven Customer Management
- Campaign management - Customer Experience Measurement
- social listening and analysis - Customer Life cycle Analytics- Acquisition,
- Digital asset and content management, conversion, value enhancement, retention
and re-activation.
- Marketing Analytics and Consumer insights
- Data visualization
- Website and mobile financial solutions
development - Information Management Solution and
Data archiving
- Creative development and release
management - Data warehousing and Master data
management
- Content Personalization
- Fraud analytics and prevention
- SEO and digital marketing effectiveness
- Enterprise solutions for seamless
integration of new payment instruments
enabling better customer experience and
replacing the legacy architecture.
- IoT and wearables payment integration
- Transaction and data security
The Digital Payments Industry- Service Lines
2. Competitive Landscape Digital Marketing and Digital Transformation
Infosys TCS Accenture IBM
Target Segment Full Stack IT Full Stack IT Full Stack IT Full Stack IT
Revenue
Revenue in BFSI 2.7 Billion USD 7 Billion USD 7.1 Billion USD NA
% Growth QoQ BFSI 0.78% 0.74% 1.81% NA
Omni channel marketing mgmt
Campaign management
social listening and analysis
Digital asset & content mgmt
Digital Marketing
Marketing Analytics & Consumer insights

Creative development & release mgmt

Content Personalization
SEO & digital marketing effectiveness

Website & mobile development

Digital Integration: Enterprise solutions for
new payment instruments
Digital
Transformation Next Gen payment integration: IoT and
connected devices
Next Gen Transaction and data security
The Digital Payments Industry- Service Lines
3. Competitive Landscape Analytics and Data Services

Infosys IBM Accenture Mu Sigma Fractal Analytics

Data driven customer mgmt.
Customer Experience mgmt.
Recommendation/Personalization
Customer Life cycle Analytics-
Acquisition, conversion, value
enhancement, retention and re-
activation.
Analytics
Data visualization
Advanced Analytic (Data Science)
Data Modeling & Predictive Analytics
Big Data
Risk Analytics and Fraud Prevention
Information Management Solution and
Data archiving
Data Services
Data warehousing and Master data
management
Data Security Solutions
Cloud and database as a platform
The Digital Payments Industry- Service Lines
4. Competitive Landscape Insights

Big IT counts BFSI among top revenue generating practices.

Big IT has a highly pervasive presence in BFSI consulting and serving, end to end digital transformation,
data management, Analytics (customer, marketing, risk and fraud) and digital marketing needs.

Seeking entry to domains already populated by competitors will result in a market driven by pricing
and erodes customer loyalty in long run– a Red Ocean Strategy, better avoided

Digital Marketing & Digital Transformation to incorporate the new development relating to M2M
triggered payments enabled by IoT, is a nascent field with a host of related services, that would need
to be adopted by Payment Industry to stay relevant and competitive. As of now, it is a field untouched
by Big IT, A Blue Ocean Strategy
The Digital Payments Industry- M2M Payments and IoT
1. Market Sizing and Outlook

Indian connected device is expected to reach a volume of 1.9 billion units by 2020. Major
contribution will be through wearables and automobiles followed by home appliances.

Connected devices and M2M payments, opens scope for digitization of micro payments like
toll, parking fees, utility bills, retail payments etc.

Assuming 20% devices embedded with payment capabilities and one payment per month
worth an average of 300 INR. For an MDR of 1%, transaction revenue will be 13.68 Billion INR
annually.

Target Segments include- Banks, m-Wallets, Connected device manufacturers (Apple, Google,
Samsung, LG, IFB), automobile, civic utilities, POS manufacturers etc.

Companies developing M2M devices

The Digital Payments Industry- M2M Payments and IoT
2. Trending First Movers

PayPal’s app for wearables featured on Samsung’s Gear 2 and Gear 2 Neo
wearables. The PayPal app lets consumers make mobile payments, store
and utilize rewards, and send money to other app users.

Tencent OS has introduced its mobile operating systems “TOS” and

“TOS+”, which can operate on multiple devices including smart TVs and
smartwatches, and enable mobile payments.

Intel Corporation has partnered with Ingenico Group to combine Intel’s

technology and Ingenico Group’s secure payment technology for the
Internet of Things. This will pave the way to a broader set of initiatives
and value-added services to address other worldwide devices for the
Internet of Things, including intelligent vending machines, kiosks and
digital signage.

American Express is looking to deliver financial services via wearable

devices. It has recently enabled its service to enable payments through
the fitness band Jawbone.

The Visa Ready Program for Internet of Things now provides IoT device
manufacturers with a path to embed secure payments into their
connected devices, enabling anything from a watch to a car to initiate
payments.
The Digital Payments Industry- M2M Payments and IoT
2. Trending First Movers (Cont.)

Topshop has launched a variety of fashionable IoT payment devices. Customers

can choose from various types of smart accessories with payment capabilities,
like keychains, bracelets, and iPhone cases. The range of products, known
as TOPSHOP x BPay, is powered by Barclay’s Bpay.

Samsung has released a smart fridge, known as the Family Hub. Users access
the Family Hub smart features through a 21″ touchscreen that accompanies the
fridge, and includes app integrations like music streaming through Pandora,
recipe books through Allrecipies, and the ability to look into your fridge via
cameras through Samsung’s View Inside. Notably for payments is the
integration of MasterCard Groceries, allowing users to purchase groceries for
delivery while standing in front of a smart fridge.

The China based SAIC Motor is releasing the Rowe RX5, with multiple online
features including online navigation, communication, and music capabilities.
SAIC also features YunOS, Alibaba’s 3rd party online payment solution.
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