If you are a consumer of internet-enabled services like cab aggregators, food delivery services or even e-commerce, it is likely that you have also used services of some fintech company. It could be to make a payment through an e-wallet or a service or to pay a friend, or to compare and apply for insurance policies or a loan, or to make an investment. The past few years have seen the emergence of many fintech companies in these segments. And, in 2018 alone, the fintech space saw developments that directly impact how you use these services.
When we stepped into 2018, the question “How to link Aadhaar with bank account or PAN card?" was among the top searched questions online, due to the mandatory linking required at that time. Many fintech companies and banks were using Aadhaar for swift on-boarding of new customers. For you, it meant instant KYC for small-ticket loans and mutual fund investments. However, the Supreme Court judgment on Aadhaar in September prohibited private companies from using Aadhaar. This effectively meant no Aadhaar-based e-KYC for all financial services, and moving to older paper-based KYC for most financial services. The instant opening of a bank account online also ceased to exist.
Subsequently, the National Payments Corp. of India (NPCI) suspended the e-sign-based e-mandate, a standing instruction to the bank to auto-debit your account periodically. If you took a loan from a fintech company or started investments through Aadhaar-based e-mandate after 26 September, you may need to submit a fresh mandate for auto-debit from your bank account.
These issues may get resolved in 2019 as the government is taking measures to provide legislative backing for voluntary use of Aadhaar as one of the KYC methods. Moreover, banks and NPCI are creating new ways to register a mandate electronically, using modes like internet banking and debit card.
On 16 October, RBI issued guidelines on interoperability of prepaid payment instruments (PPIs) that will enable transfer of money from one e-wallet to another, besides offering other benefits.
Once the guidelines are implemented by PPIs like e-wallets, which can be expected early 2019, you will not need to have multiple accounts with different e-wallets just because a specific service accepts payments only through one e-wallet. Further, your e-wallet account will function like a bank account, in some ways, for digital payments, including having a Rupay or Visa or MasterCard card of its own issued by the e-wallet company. You will be able to transfer funds to any other e-wallet or bank account or make a payment for any service either online or even through point of sale (PoS) terminals or swipe machines at retail outlets.
Most digital services are dependent on seamless payment experience for consumers because users do not like friction in payments systems. For instance, for mutual fund investments through online platforms like Scripbox, there was different level of friction for smaller investors from different banks, said E.R. Ashok Kumar, CEO and co-founder, Scripbox. “If a person wants to make a ₹ 1,000 investment or start an SIP, technology should be able to make it possible and make it easier. Sometimes, the person was convinced to make that investment but got stuck either on the KYC or the payment leg of the transaction. With UPI, that payment friction has been solved," Kumar said.
NPCI also launched UPI (Unified payments interface) 2.0 in August 2018, mainly to expand UPI from a person-to-person to a person-to-merchant payment system. One of the important features in the new version is use of overdraft facility in your bank account through UPI.
“Every time a customer makes a payment, the merchant can ask her if the payment needs to be charged as a credit and charged from the overdraft account. So even if a consumer does not have a credit card, she will be able to use ‘credit-card like’ capabilities. There are pilots underway on this and we will see it getting started early 2019," said Mahesh Makhija, emerging technology and digital leader, EY India.
Through UPI 2.0, the fintech industry was also expecting a standing instruction-like feature that would enable the UPI platform to be used for recurring payments like SIPs or EMIs. Though it has not happened yet, it could become a reality in 2019. UPI 2.0 has already enabled a one-time mandate, a feature that allows consumers to pre-authorise a transaction and pay at a later date for a specific purpose.
While easing and simplifying financial transactions has been the focus of fintech until now, the next wave could be voice-assisted financial services. Watch this space.