Financial inclusion remains a core issue in India, as much of the population is unbanked and has limited access to the formal financial system (in addition to remaining highly dependent on cash), thus e-payments and mobile payments is a common theme across the new payment banks. There is an 18 month window for these ‘challenger banks’ to activate their licenses, so we will have a better sense of which of the new organizations will be leading the pack by early 2017.
Payments Trends in India
A dynamic flux of factors is positioned to continue the rapid evolution of the payments ecosystem here in my country. In addition to hungry new entrants in the retail banking space, other forces, including rising incomes—especially among the country’s dynamic tech-savvy, millennial population—increasing internet access, 1+ billion active mobile phones and a plethora of digital payment alternatives such as RuPay and Paytm are converging to overhaul what has historically been a market dominated by a few mega-banks and a massive reliance upon cash. For ACI, these changes align well with the company’s strategy to support the global transformation of payments to an any-to-any, real-time, cross-border model. This includes protecting consumers, merchants, banks and other market participants from the devastating effects of fraud, money laundering and other forms of payments crime as a standard component of any payment transaction.
Demand for Managed Services Increases
In the meantime, those of us in the payments space in India are witnessing another massive shift: in parallel to this tremendous sea change in the Indian banking landscape is a notable move towards SaaS, or managed services. Banks and retailers in India, as well as the new payment bank license holders, are demanding outsourced and fully managed end-to-end models versus the cumbersome and expensive on-premises models of the past. The move to SaaS is typically for smaller sized banks with less capacity to scale—and a need to quickly leverage managed services. Larger institutions may also benefit from the trend by augmenting their existing on-premises solutions with emerging niche use cases using a SaaS offering.
Bringing a complete portfolio of services to market in a turnkey fashion is no longer the stuff of a monolithic, vertically integrated mega-corporation—and few companies are interested in dealing with such a behemoth. Instead, these new solution offerings showcase best-of-breed technologies, capabilities and human resources that are stitched together by collaborative, value-adding partnerships.
ACI recently announced our strategic alliance with AGS Transact Technologies Limited, India’s leading end-to-end solutions provider for the banking, retail and petroleum sectors. Similar to the many new payments market entrants, this type of strategic alliance has the ability to challenge the traditional banking infrastructure in India as retail and banking customers will be able to rapidly deploy solutions across multiple channels with a dramatically lower total cost of ownership on a flexible platform that enables continued innovation and new capabilities.
Demonetization in India
Prime Minister Modi’s demonetization program, introduced literally overnight on Nov. 8 and aimed at taking so-called black money (counterfeit and illegally gained currency) out of circulation, has sent shock waves across the financial systems in India and touches virtually every one of our citizens in some way. The change is dramatic and far-reaching. As ACI’s team in India works tirelessly to ensure that the new denominations and withdrawal limits are integrated smoothly in India following last week’s news, we are proud to deliver a “sound night of sleep” to our customers to conduct business as usual during a time of great change in India.