The migration to mobile wallets has proceeded at a lackadaisical pace in the U.S., with consumers and merchants alike not seizing up the technology with previous non-cash schemes as credit and debit card transactions carrying the load. However, in those economies that remain cash-oriented, the transitions are seen in dramatic terms. Much of this has to do with government involvement in helping to implement the move, as is the case in India.
Fifteen banks have rolled out Unified Payment Interface (UPI) to introduce a virtual payment address, easing digital transactions between two parties. Also Reserve Bank of India’s (RBI) decision to provide 11 entities with licenses to set up payment banks for the underserved population of the country will lead to an increase in the usage of digital banks and wallets in villages. This is a significant step that has won accolades from various corners of the startup industry, including from the founder of Paytm, Vijay Shekhar Sharma. “This is indeed a great moment for us. We have managed to significantly reduce the cash usage in the economy,” Sharma said. “With this nod from the RBI, we will be able to further drive our overall commitment to financial inclusion for the unbanked segment, modernize payment systems and build more trust for our services.”
Government involvement has also manifested in the proposed creation of a unique identifier number, or Aadhaar, tied to biometric and demographic data of individuals. Concerns around privacy have slowed the implementation of the Aadhaar program, as has India’s existing infrastructure system in supporting the devices that will be needed to extend the use of electronic funds. However, the transition to the use of e-funds over cash by India’s growing middle class, which is roughly the same as the population of the United States population as a whole, will indeed be a major shift, and serving those potential global market consumers is an opportunity.
Overview by Joseph Walent, Senior Analyst, Emerging Technologies at Mercator Advisory Group
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