Digital Payments - India embarking on another bold move..

Indian banking ecosystem has over 920 Million debit cards in circulation. That is almost 20 times as many active credit cards in the country. In spite of the great number of cards in circulation, our actual-usage of it is far lesser than desired.

Sadly, each debit card gets used only 1.4 times (average) every month. Worse still, 7 out of 10 times, the Debit Card is used at an ATM. These statistics from the Reserve Bank of India (RBI) paint a very clear picture.

Indians use debit cards very sparingly; and even then, it is mostly to withdraw cash. 

If the national aspirations of becoming a 'digital economy' must be realized, the conservative-use of Debit Cards must be overcome. There is a strong need to articulate new use-cases that promote card based transactions. One such framework/initiative in the works is called the National Common Mobility Card (NCMC). 

The NCMC is a regular debit card with the additional capability to make contactless-payments (tap and go) as well. It operates on the ‘EMV Open Loop Card with stored value’ model and supports dual interface (contact & contactless).

The NCMC framework combines the benefits of both the contact and contactless payments into a single card. Going forward, the RuPay cards built on NCMC framework can be availed from any of the large banks as either debit, credit or prepaid cards.

The intention behind NCMC is to use the same card for several purposes,

• Contactless Payments: Best used for low monetary-value transactions such as, Buses, Ferry, Metros, Smart cities, Highway Toll Plazas, Parking, Cafeterias, Groceries, Cabs etc.
• Contact Payments: Best used at Shopping Malls, ATMs, Diners etc.
• Online Transactions: Best used for eCommerce, EMI payments, NEFT/RTGS etc.

Challenges Ahead. 

In India, 90% of credit card and almost all debit card transactions are domestic in nature. The Two-Factor Authentication (2FA) has been largely successful in averting misuse of cards; especially among the low-literacy customer base. While the 2FA lends the much needed layer of security, it may often create an element of friction that could be done away with.

In the low-internet connectivity areas, insisting on 2FA could be impractical. Ex: Highway Toll-Plazas, underground Metro stations, cafeterias etc. Even in areas with strong internet-connectivity, the 2FA might cause delay and holdup for small-value transactions. Ex: Cafeteria, Bus, Tolls etc. The NCMC cards seems like a perfect solution.

Of the 920 Million debit-cards in the country today, only 15 Million are estimated to be NFC (contactless) enabled. Also, of the 3.7 Million POS terminals, about 900,000 can support NFC payments. This shows the gap and also the opportunity to accelerate digital payments. 

The road to implementation of NCMC will have its fair share of challenges. The success of this ambitious initiative depends on several factors, including,

• Building indigenous ‘Automatic Fare Collection (AFC)’ systems  
• Upgrading of ticketing machines at buses, ferry and parking etc  
• Active participation of all Public Transport Operators (PTOs) 

Impact.

The NCMC initiave can strengthen the payment-ecosystem in many ways including,  

• Ensuring EMV grade security for large-value transactions (with 2FA) – Online, ATMs and at POS machines.
• Increased speed and throughput of low-value transactions through a ‘tap and go’ (without 2FA)
• Reducing the cost-of-transactions. The SVC aspect of the card saves cost, by not requiring to update a central database for every micro-payment.

In conclusion. 

Considering the Indian urban commuter, there is a potential to at least triple the number of card-transactions in the near future. After the success of UPI and RuPay platforms, the NCMC framework may just be the next big blockbuster in the Indian payments ecosystem.