digitisation and demonitisation panel
TRANSCRIPT
SWIFT_Digitisation_Prateek Roongta_vF.pptx 0
DIGITISATION AND DEMONETISATION Evolving into a cashless economy
Prateek Roongta Partner and Director, BCG
6th April 2017
India and Subcontinents
Regional Conference
Mumbai
6 April 2017
SWIFT_Digitisation_Prateek Roongta_vF.pptx 1
Payments in India have evolved rapidly
The payments space has witnessed large scale disruption
• Digital at the heart and centre – innovative, mobile based solutions
being deployed
• Entry of non-banks as payments service providers – threatens
disintermediation of banks
Consumer needs and expectations are evolving rapidly
Banks are responding rapidly in order to retain their customers and balances
• Guided by the experience offered by e-commerce players like
Amazon and Uber
• Increasing mobile and internet penetration provides further impetus
• Thinking like "non-banks" to deliver cutting-edge payments
experience
SWIFT_Digitisation_Prateek Roongta_vF.pptx 2
Digital payments gaining traction
639
389
172
9553
0
200
400
600
800
1,000
Number of transactions (million)
+86%
2016-
20171
2015-
16
2014-
15
2013-
14
2012-
13
814
604
255
108
33
0
200
400
600
800
1,000
Number of transactions (million)
+123%
2016-
171
2015-
16
2014-
15
2013-
14
2012-
13
Mobile Banking Mobile Wallets
Value
INR billion 60 224 1,035 10 29 82
2,367 6,022 306 270 321 INR / Txn
206
341
4,040
10,375
8,704
13,631
307
377 1,124
Note: 1. 9months data is taken for 2016-17 Source: RBI; Payment System Indicators.
SWIFT_Digitisation_Prateek Roongta_vF.pptx 3
Customers exploring digital payments beyond mobile recharge
22
29313136
5155
66
1620
28
1814
29
22
73
0
80
60
40
20
% respondents
Other
service
s
In store
(POS)
Fund
transfer
Travel
booking
Ecommerce Other
utility bills
Mobile bill
payment
Use cases
Prepaid
mobile
recharg
e
Non metro users Metro Users
POS payment and usage for other services low
Bill payment second largest use case
Prepaid recharge still the largest use case across metro and non metros
Source: Google-BCG market study based on Nielsen consumer survey Question: For what all purposes have you ever used a digital payments instrument?
SWIFT_Digitisation_Prateek Roongta_vF.pptx 4
Convenience, not only offers, drive stickiness of customers to mobile payments
Co
nve
nie
nc
e
Off
ers
Metros Non- Metros
66% 51%
48% 57%
Source: Google-BCG market study based on Nielsen consumer survey Question: Please select your reasons for using digital payments
SWIFT_Digitisation_Prateek Roongta_vF.pptx 5
Customers open to using digital at physical POS
48
49
52
61
66
71
73
40 60 80 20 0 %
Unorganized retail
Travel and transport
Professional services
Utility bills
E-commerce
Organized retail
Food and entertainment
Large format POS use cases
Source: Google-BCG market study based on Nielsen consumer survey Question: Please tell us for which regular payments are you most likely to use digital payments instruments
SWIFT_Digitisation_Prateek Roongta_vF.pptx 6
Merchants open to accepting digital payment
Merchant acceptance network will grow 10X in the next five years
41%45%
58%
84%
Agree that
convenience is the
largest reason for
continued usage
Value the avoidance
of this struggle for
change
Value not having to
store and manage
cash
Find it a convenient
way to account and
track transactions
Source: Google-BCG market study based on Nielsen consumer survey Question: Please select the reasons that apply to you for businessmen started accepting digital payments
SWIFT_Digitisation_Prateek Roongta_vF.pptx 7
UPI and India Stack could be game changers
IND
IA S
TA
CK
Open Personal Data Store
CONSENT LAYER Permission "on demand"
IMPS, UPI, APB and AEPS
CASHLESS LAYER Financial tx "on demand"
e-KYC, e-sign, Digital Locker
PAPERLESS LAYER Documents "on demand"
Open access to biometric identification
PRESENCE-LESS LAYER Authentication "on
demand"
Source: India Stack website, ispirt presentation, https://medium.com/wharton-fintech/the-bedrock-of-a-digital-india-3e96240b3718#.h0a1hgcp2
SWIFT_Digitisation_Prateek Roongta_vF.pptx 8
Measures taken..
Banned Rs 500 and
Rs 1000
.. are resulting in a more digital economy
"Demonetisation" has provided an impetus to this digitization journey
• Almost all merchants need to accept digital
payments
• e.g. Paytm has increased its offline merchant
base from 8-8.5 lacs to 10 lacs
• Plans to hire additional 10,000 people to acquire
merchants (current team size - 4000)
More
cashless
• More people depositing money with banks
• Banks betting big on UPI
• e.g. ICICI Bank and a few others have inbuilt UPI
into its mobile banking app
Merchant
acquisition
more critical
UPI/Banking
larger
PPI non KYC limit
doubled to Rs 20k
No transaction
charges on debit
cards
• More people use cashless instruments- cards,
mobile, digital
• e.g. even small vendors prefer payment
through wallets rather than cheque
• Paytm - 7 mn txns daily > combined average
daily usage of credit and debit cards in India
SWIFT_Digitisation_Prateek Roongta_vF.pptx 9
Consumers, merchants adopting digital payments.. ~3.5X increase in POS demand, ~1.5X increase in POS transactions from Nov '16 to Dec '16
Merchant Consumer
3.5X increase in POS machine demand1
• from new categories of merchants such as
small kirana stores, vegetable vendors
3X jump in m-wallet merchant
registrations
• Number of Paytm merchant user base (mn)
Avg POS demand
(per month pre-demonetization) 6,000
Avg POS installed
(per month post demonetization) 20,000
Pending POS requests (total) 70,000
Source: 1. Secondary research 2. POS and PPI – Nov based on RBI reports, Dec based on projections of RBI representative data; UPI/USSD – NPCI data 3. BCG Center for Consumer Insight Survey Dec 2016 covering 1700 respondents across Metro to Tier 3 cities and SECs (A-D)
2016 2017 Target ~300%
1-1.5 5
# digital transactions post demonetization2
POS
usage # txns
(Mn)
Nov 2016
# txns
(Mn)
Dec 2016
~150% 501 332 ~130% ~650
Intent3
Intent3
PPI
usage # txns (Mn)
Nov 2016
# txns (Mn)
Dec 2016
252 169 ~150% ~500 ~200%
UPI/
USSD
usage # txns
(Mn)
Nov 2016
# txns
(Mn)
Dec 2016
Intent3
104 7 ~1400% ~150 ~150%
SWIFT_Digitisation_Prateek Roongta_vF.pptx 10
We expect cashless tractions to overtake cash transactions in the next 5 years
2005 2010 2015 2020e 2025e
89%
11%
5%
78%
22%
13%
60%
42%
26%
41%
59%
39%
In 5 years DIGITAL
will be as large as CASH
Cash
Non-cash
Digital
92%
8%
1%
Note: Digital includes electronic payments, ACH, mobile based payments etc. Digital is a subset of "Non-cash" Source: BCG analysis
2022e
SWIFT_Digitisation_Prateek Roongta_vF.pptx 11
Key questions for consideration of the panel What would drive sustained use of digital payment instruments?
What could be potential barriers for adoption of digital payments?
What role can banks and PSPs play in driving adoption?
Can UPI really be a game changer? How to make it happen?
How to drive digital payments for B2B payments (for MSMEs)?
How would digital payments providers build a sustainable business model?
What is expected from regulators / government to turbocharge adoption?