Alternate Payment Solution – Idea 1
This is the first in the series on problems and solutions posts, problems faced in a day-to-day life and a probable solution to this.
The primary means of payment in India is cash and coins. Credit cards can not be accepted by the unorganized markets and almost 95% of the transactions today, happen in unorganized markets.Is this a problem? Well ask yourself. Would you be more comfortable transacting without any exchange of cash, or with it. Mind it, by no exchange of cash, I do not mean plastic money. I mean an alternate payment solution.
There are primarily two main reason for this. First, the banks do not and can not extend credit card machines to unorganized market. To some of the small stores that they are extending, the charges are very high, and deters a merchant from using it or availing that option. As a result, the transaction falls back to the use of traditional currencies.
Second, not everyone is eligible to get a credit card. And quite honestly, I would not like to see India become a credit card country. We have all seen what has happened in the west with a debt ridden economy. Debit Cards are present, but again the usage for them is limited to the ATM only to a large extent.
So that brings us back to the problem. Is there an alternate payment solution possible? Mobiles?
Yes, mobiles can be the alternate payment solution. And no, I am not looking at the NFC. It will take about 3-4 years to gain mass market share. Rather than be dependent on a device again, (mobile phones in case of NFC) I would rather like to be use the mobile number or the UID as an identity. With the fate of UID still not clear, the balance shifts in favor of the mobile number as identity.
RBI and the NPCI have already laid the platform for this, called as Interbank Mobile Payment Service (IMPS). Using this technology, money can be transferred from one bank account to another, instantly. Almost all the big banks have now enabled this in their system, and it is F.R.E.E.
NgPay has implemented this solution to some extent. As far as I know, they have tied up with HDFC bank for this but it is again not in mass scale.
We need a service provider, who would be implementing this solution across multiple banks. With the platform ready, it will need effort to have tie-up with banks and then implement a service solution to make an app which can work across mobile OS, like jaxtr sms. This does work even without the need for the app, just by the use of SMS. However, a useful and easy to use app will go a long way in driving adoption.
The opportunity in this sector is HUGE. Even without replacing the credit card industry, this solution can go to the grassroot levels. Enable a local kirana store to accept payment. It can even enable a temporary, road side shop to accept payments and have transactions super easy. Think of Square Up for India.
Yes, there will be a lot of concerns, adoption has to be driven, users will have to be educated. But in the long run, this is certainly a solution, which is worth giving a try. It may also, I said may, help in controlling corruption, and black money.
Your comments are welcome.
P.S.: If anyone does decide to take this idea and start working, I would glad to offer my help in any capacity possible.