As financial inclusion becomes a key item on the agenda of governments in emerging markets, the payments business will be driven by increased electronic payments. Rising economic power will help these countries leapfrog mature markets and build a state-of-the-art payments ecosystem driven by technology, changing customer expectations, the rise of e-commerce and regulatory supervision. A PwC report, Emerging markets – Driving the payments transformation, estimates the emergence of fin-tech could over the next few years disrupt consumer banking, fund transfer & payments, SME banking and brokerage services.
While payment banks are expected to start services in India in 2016, there are still issues with electronic payments. Though there are over 25 million credit cards and 660 million debit cards in India, there are just 1.4 million point of sale terminals as of March 2016. Brazil in contrast has 4.5 million. Debit card transactions in India grew 43% whereas growth in credit card transactions was a more sedate 27%. As far as automated teller machines (ATMs) are concerned, India has around 2 lakh machines against China’s 7 lakh.
Vivek Belgavi, FinTech Leader, PwC India said, “Given the underlying infrastructural issues in emerging markets, there needs to be a focus on developing the infrastructure both for issuing and acceptance of payments products and instruments. Alternate payment instruments and modes like mobile wallets, virtual cards and accounts, social media and contactless payments are gaining traction for specific use cases, especially the unbanked customer base, driven by technology, customer needs and declining margin.”
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Expect major changes over the next decade. That will be driven by cutting-edge technology that reshape the next-generation payment systems. Also 90% of the population under 30, which account for 75% of online transactions reside in emerging markets. The rise in online transactions, while curtailing the black economy will also stimulate growth in emerging economies.
Hugh Harley, Financial Services Leader for Emerging Markets, PwC says “Given the large unbanked population and the growing regulatory agenda to engage these people into the financial system, emerging markets are in a unique position to drive growth in the payments industry.”