Visit Beijing, and you would be greeted with street vendors who are extremely polite and would take their time to help you out with your purchase. It’s a wonderful feeling, you go on and select something you really like and then help yourself with the payment.
Not so soon. You see, physical money or plastic money is no more accepted in a vast majority of shops in Beijing. They would insist you to make the payment using any one of the two popular online wallets, Alipay or WeChat.
You would wonder why not accept cash instead. You download the app, login or signup, set up your bank accounts and scan a QR code to make the payment. Past the first payment experience, you move on to have your lunch and pay digitally. And suddenly it hits you that you didn’t require to change all those physical currencies in the airport exchange. You realize that digital payment is the next thing.
India, with the Paytm revolution, has just begun to make the payments look more or less like this.
But India is way out of the league compared to China in terms of digital payments. In 2019, China topped the list of countries with a total transaction value of $1.57 Trillion through the digital medium. India could only manage 0.064 Trillion in the same period.
Comparing it with the number of users doing online payments in both the countries and you would understand the enormous potential fintech companies have in India. China has 835 Million (+4.6% YoY) online users as compared to 513 Million (+9.1% YoY) in India. The average mobile user in China spent almost $1,155.5 online, while in India it stood at $14.8.
Why compare with China? Because china is the epitome of online payments right now. The models which Chinese fintech companies use will be used by India and most other countries going forward.
The interesting number in favor of India though is the growth percentage of users Year-on-Year — it is almost double at 9.1% compared to China’s 4.6%. India is set to become a powerhouse online consumer country and fintech companies are banking heavily on it.
Unlike most developed countries, India and many other developing nations will skip the legacy payment structures like credit cards and move to mobile technology for the masses. UPI is one of the finest implementations of this.
Digital Security Takes Centre Stage when it comes to KYC
The digital revolution of India makes the case of digital security and user regulations paramount. Safeguarding the interests of every user and the digital companies will make for a tough challenge.
As we saw when most Indian wallets got misused by the users to move money without an actual trace. Anybody with a mobile number could create an account and transact through the online wallets. And mobile phone numbers were pretty easy to get. One could have multiple mobile numbers and subsequent wallet accounts in the past.
Indian regulatory seeing the misuse moved in and mandated KYC for all the digital wallet companies. KYC (Know Your Customer) assured that actual users used the online payment services and that a user was allowed only one account.
The mandate was a necessary step to curb the misuse of these wallets, but the implementation of it is far from complete. KYC entails the need to have the users’ identity, as well as the residence, verified. This is a costly affair, especially the residence verifications.
The astonishing growth of Indian users moving online for purchases is groundbreaking. The authenticity of the users will ensure more transactions happening through the online medium. Mobile will make for the bulk of payments online and will hold our online payment identities.
The case for KYC enforcement and building an online repository of authentic users is the same as having physical banks verify identity before providing accounts.
It ensures the service reaches many and helps in building trust in the system. The future is digital and the fintech companies of the present will be the gatekeepers of personal online payments of the future.