The landscape of payment processing has been evolving rapidly over the past half-decade. Demonetisation certainly gave an impetus to digital wallets but they were supported by a vast digital ecosystem. This digital ecosystem allows consumers to be continuously and seamlessly connected online. Increasingly consumers do not regard such connectivity as a luxury but rather a necessity. They expect providers of digital services to offer seamless, effortless and enriching digital experiences. Such experiences are expected from payment providers as well. Successful payment providers are those that remain lockstep with the latest trends in the payment processing industry. A few such important trends are as follows.
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Learning about consumers using AI and Big Data
Traditional credit scores remain valuable for assessing the creditworthiness of loan applicants. New technologies like AI and big data are helping payment processors fill gaps left by traditional tools. As nearly 30 crore Indians use smartphones, payment processors are using data collected from smartphones to learn more about consumer's habits than was possible before. Data collected from social media profiles, payment activities, online purchases, digital wallets, and online behaviour is used to build cogent profiles about consumers. Using insights from such profiles payment processors can evaluate the creditworthiness of individuals and design financial products suited to their needs.
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The data collected from online behaviour helps build more accurate profiles of consumers than is possible using traditional techniques. So while traditional credit scores are useful, new tools help evaluate a much larger number of consumers and bring them into the fold of financial inclusion. Payment processors are putting AI to work and gleaning insights about consumers thereby expanding the credit base. They are also mitigating risk more effectively than before.
Consumer’s habits were nearly ungraspable by businesses in the past yet today they can be quantified, analysed, and used to market services and products. Successful payment processors know this.
Data security is increasingly important
Scarcely a day passes without news of a data breach. As more and more data is generated, securing it becomes increasingly important. In the wrong hands, data can lead to financial loss and loss of privacy. The potential for misuse of data is vast, which is why payment processors are adopting technologies that keep their customer's data secure. Customers have faith in online transactions because they believe them to be secure. Should their faith in such transactions be shattered because of the breach of personal data stored with a payment processor, they may no longer use the processor's services. Successful payment processors know how vital it is to secure their customer's data and are adopting the latest encryption technologies to do so. While hackers are growing increasingly sophisticated, payment processors are finding ways to remain one step ahead.
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Shift from bank branches to digital space
Approximately a quarter of Indian consumers use smartphones of whom a significant number are digital natives. Smartphones grow more powerful each year as does the software powering them. They are also more affordable than before. The ease offered by smartphones has led to a shift in consumer’s worldviews as they increasingly turn to smartphones to do tasks they earlier would do at brick and mortar stores or offices.
Payment processors in India have recognised that consumers socialise, buy, consume, work and often bank online. To take advantage of consumers' migration online, payment processors are building a greater online presence and offering digital services. The popularity of digital payments is growing and payment processors are offering services that facilitate digital payments. In addition to offering payment services, payment processors offer other services online including credit.
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Young consumers who are digital natives consume services online. Their habits and consumption patterns are disrupting numerous industries. As they become a larger segment of consumers, their behaviours and habits will force industries to adapt and give rise to new industries. The migration of consumers online and the consumption of services online is the most potent trend shaping commerce today. This will continue unabated in the decades ahead and successful payment processors are prepared to serve tens of millions of digital natives today and the hundreds of millions who will consume online tomorrow.
Gradually, traditional infrastructure used for making payments will be displaced by digital infrastructure. The behaviour of younger consumers is already transforming the economy. Young consumers expect services literally in the palm of their hands. Shortly they are likely to expect to avail all services offered by banks from digital platforms. The migration of hundreds of millions of Indian consumers online will be the defining trend of the 21st century and payment processors in sync with this trend will flourish.
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The author is the head, Digital Business – Retail of India Transact Services offering Ongo digital payment solutions
