Towards the end of 2016, India’s Prime Minister Narendra Modi eradicated 86% of cash in circulation in the country in an effort to demonetise the economy and drive India towards becoming a cashless society. To do this, he removed the 500 and 1000 rupee notes from circulation.
The initiative was put in place with the goal of fighting corruption, and allowing government money to trickle down to the general population instead of being swiped by corrupt officials. It is also intended to pull India towards a heavier reliance on banks and electronc payments. In an economy where around 98% of transactions were conducted in cash, this announcement really turned India on it’s head. Nearly overnight, the Indian population began flocking towards ewallets.
There is huge room for growth of the mobile payments industry in India. An average of 6.7 electronic payments are conducted per person in India each day, compared to 14 in China, 249 in Australia and 201 in the UK. This is not surprising, considering the fact that only 17% of Indians currently have a smartphone, and just over 50% have a bank account.
Mobile wallet adoption is indeed experiencing a massive increase. PayTM is the biggest mobile payment company in India. Before Prime Minister Modi’s announcement, their use base expanding to include tens of thousands of new users each day. After the announcement, they found themselves with half a million new customers per day. Within a month, PayTM had acquired 10 million new customers.
In order to prepare for the growth of mobile payments, a proactive strategy will need to be put in place in order to fight payment fraud. £3.2 million debit cards were compromised during one of the largest even Indian financial breaches in October 2016, which happened when malware stole consumer details from payment systems. Due to this, mobile payment providers must put security at the top of their priorities lists. Current fraud detection systems in India combine tokenisation, authentication and legacy backed fraud detection systems. Some less advanced systems have only basic fraud detection capabilities and depend on rule based transactions. These methods not only increase costs, but also negatively impact customer experience.
Although payments must be secure, the customer experience is paramount to creating a thriving mobile payments industry. Payment providers are advised to adopt risk based authentication during the pretransaction phase for all mobile transactions. In depth behavioural mapping comes from improved visibility in to the user’s payment activity, and allows accurate identification of fraudulent attempts. Only when a transaction is flagged as high risk for fraud will authentication then be needed. At present, mobile payment controls do not give banks or mobile wallet providers the visibility they need to detect fraud in the pre-transaction phase. If they were able to do this, many fraudulent transactions could be blocked, whilst friction and fraud detection costs would be decreased.
The Indian government has already helped millions of citizens to set up personal bank accounts and continues to promote its own digital payment technologies, such as AEPS, UPI and BHIM. For India’s cashless economy to flourish, the government must work with mobile wallet providers in order to improve user experience. Initiatives should also be put in place to make users aware of the security features available within their device, as many are unaware of how to protect themselves online, and many low value frauds are carried out this year. In order realise Prime Minister Modi’s dream of a digital economy in India, more must be done to increase consumer trust in online and mobile transactions.
