Visa to launch QR payment system to Sri Lanka soon | Daily News

Visa to launch QR payment system to Sri Lanka soon

Governments of India and Sri Lanka are encouraging digitization and this would result in a huge growth in cashless payments in the future, said Shivakumar Sriraman, Chief Risk Officer, Visa India and South Asia.

Nearly 20-25 billion devices across the planet will be connected by smart devices by 2020 in some form of fashion and this too would help to promote digitization, he said.

"If digitization was to increase in India by 10%, then the estimated cost of cash would be 1.5% of GDP. So, 10% increase means that by 2022, India will save Rs. 4 lakh crores. This is the size of the savings potential for digitization. We must take steps; we are 8, we must move to 1," Sriraman said.

In comparison with China, 45% of China is already digitized. However, only 8% of India is digitized, which presents a huge potential to grow.

The government’s adoption of digital payments will be critical in driving India’s digital dream. It is both a challenge and an opportunity because the biggest consumer of cash is the Government of India. Out of the 900 billion or so of PCE, the citizen to government payments such as taxes, water bills, electricity bills, MTNL, etc., amount to about US$ 150 billion. Less than 2% is digital. Indian Railways which is largest ecommerce merchant in India, income tax, corporation tax, water tax, etc., are valid examples.

India represents perhaps the single largest cash displacement opportunity in the planet. India’s PCE is about 60% of its GDP, in dollar terms it is about a trillion dollars and less than 8% of that is digital.

“At Visa, our mission is to help digital payments replace cash as a mechanism for payment. If you look at countries like Sweden, they are already in excess of 90% digital payment penetration while India we are still 7-8%. I would say this gap is the potential that all of us have. I think we are at the cusp of what is a significant decadal opportunity,” Sriraman said.

“The size of the challenge and the opportunity in India is too large for one player to take on himself, whether it’s Visa, RuPay, MasterCard, or anyone else.”

In terms of debit activation rates in India, 90% of all debit card transactions are made on an ATM, as per the RBI data.

“The interesting thing from India’s perspective is that we have about surplus of 830 million debit cards. The basic understanding that one needs to input four digits to withdraw cash. Therefore, using the same payment credential, to put it into a machine and type the same four digits and the transaction is over, it’s an easy education from a consumer perspective.”

Visa is really excited about the potential of debit cards in the country; the use of debit cards is increasing. “I am not using a debit card. I am using debit credentials. Those credentials can be used in QR. This is the first operable QR system in the world. It will be shortly launching in Sri Lanka as well.”

QR is a simple yet powerful solution with great potential to shift consumers and merchants from cash to digital payments for everyday spends. It provides the speed, security and convenience that cash payments cannot match. With the common standards, coupled with the low-cost acceptance method, QR payments can enable India’s financial inclusion.

“We have seen the merchant base in India expanding from 1.57 million in November, to 2.6 million merchants now and in Sri Lanka too this segment is increasing.”

India is witnessing a change in the way digital payments and financial services are delivered to consumers. The key drivers of this change includes a seismic shift in the way consumers shop, pay, and manage their money (driven primarily by the ubiquity in connected devices) and the emergence of rich commerce experiences with payment embedded as part of this digital experience.

Data suggests that there are between 14 to 30 million merchants in some form in the country. The current numbers for BharatQR adoption stands at 2.5 million merchants, and for a country of India’s length, breadth and diversity, this count is not even scratching the surface.

The medium and the SME sector in India is the least organized in terms of availability of formal finance, which is one of the reasons why the NBFC price to book valuation is high. But the NBFC’s can lend only 5% to 10%; however the merchants don’t have a payroll statement or a cash flow statement.

“The interesting thing about fintech is that one can’t lose electronic payments so it can be used as a surrogate to impute gross margin, profitability and therefore really increase the access to working capital and formal finance,” said Cietan Kitney, Head of Asia Pacific Merchant Sales & Solution, Visa. "Not only is finance expensive but it is also not available. Finance is expensive because NPAs are high. Once the digital footprint grows, the finance rates can be efficient. It will be higher for a defaulter but it will be lower for someone with a good credit score," he said.

“In India, there are two reasons why we feel optimistic about merchants adopting digital payments. First, with the monthly GST and reporting, etc., there is an electronic trail is being created. Second, the appetite for SME lending in India is high because it is underpenetrated. Anybody who leaves a digital footprint gets more enquiries, supply efficiency and access to formal finance. We think it is going to be a significant positive drive.”

“As the leader in payments, it is imperative that Visa enables its clients to meet consumer demand and help them keep up with the pace of innovation in digital commerce,” Kitney said.


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