Digital payments boom but rural India in gloom; banks rope in Microsoft to take UPI to masses

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Updated: December 4, 2019 6:32:05 PM

There is still a huge discrepancy in the usage of digital payment modes in rural areas, compared to their urban counterparts.

UPI, digital payments, demonetisation, rural india, digital transaction in rural india, digital paymentsAs UPI scales up, security comes increasingly into focus and the nature of real-time payments means real-time fraud. (Bloomberg image)

Even as digital payments in India saw tremendous growth in recent years, it is yet to reach a large section of the country. With the internet penetration of only around 20 per cent, India’s rural heartland has little role to play in pushing UPI transactions to cross the one billion mark. “While there is unanimity in the digital payments space that demonetisation proved beneficial in driving digital payments adoption across the country, there is still a huge discrepancy in usage in rural areas vis-à-vis their urban counterparts,” Kaushik Roy, Vice President and Country Leader, South Asia, ACI Worldwide, told Samrat Sharma of Financial Express Online in an interview. Also, on the real-time frauds evolving with real-time payments, he said that older legacy fraud prevention solutions are no longer fit for purpose as India’s digital payments landscape evolves.

Here are the excerpts from the interview:

How can India’s rural heartland be made a part of flourishing overall digital space? 

While there is unanimity in the digital payments space that demonetisation proved beneficial in driving digital payments adoption across the country, there is still a huge discrepancy in usage in rural areas vis-à-vis their urban counterparts. In a vast country like India, where more than half of the population resides in rural areas and where mobile and network connectivity issues are still common, the industry could look to build Public-Private Partnership models to better the infrastructure. 

The focus should also be on introducing awareness programs that educate consumers on digital payments. Investments in developing payments infrastructure, increased internet and smartphone penetration, availability of low-cost data, policies to drive merchant adoption and supportive regulatory policies will all help drive the growth of digital payments and financial inclusion of the rural populace. 

What are the roadblocks in increasing digital transactions? 

While a growing number of consumers are adopting digital payments in urban areas, many consumers still largely prefer cash, especially in semi-urban and rural areas. Lack of merchant acceptance of digital payments in these geographies, coupled with limited financial literacy further impedes the wider adoption of various digital payment modes. 

Also, there is still a lack of robust digital infrastructure, including mobile connectivity and broadband communications to a large proportion of the populace. This connectivity challenge makes it more difficult to address authentication challenges, card security infrastructure and last-mile connectivity of Point of Sale (POS) terminals. 

How can the entry of Microsoft Azure boost India’s digital landscape? 

As UPI scales up, security comes increasingly into focus and the nature of real-time payments means real-time fraud. Older legacy fraud prevention solutions are no longer fit for purpose as India’s digital payments landscape evolves. However, cloud deployment of fraud prevention solutions could help banks of all sizes to protect transactions with enterprise-level fraud technology. Importantly, cloud deployment promises to help do this in a more affordable way than traditional on-premise licensed software.

What are the possible areas where Microsoft Azure can help in boosting digital payments in India?

Although initially, we saw signs of reluctance around cloud technology – especially in the BFSI space due to security concerns – we have now begun to witness a positive shift. Despite privacy fears and continued debates over regulatory frameworks around localised data, banks have now started to consider cloud as a key enabler of digital transformation, which in turn can boost customer service and help banks to differentiate in a dynamic and competitive market. Seeing this opportunity, we are partnering with Microsoft on a global scale to drive the payments industry’s rapid adoption of cloud technology.

It’s important to note that scalability also works both ways – while it is critical for banks and payment providers to have the high capacity to handle future volumes, the cloud enables them to ‘scale down’ during off-peak periods when that capacity is not needed. This offers significant savings in terms of infrastructure costs, as well as providing a platform for greater innovation and faster speed to market. In short, all the factors that will be needed to ensure success in a rapidly evolving market.

With the increasing cases of fraud, what measures are necessary to be taken? 

As real-time payments become commonplace, the window of time to detect and prevent fraud is probably measured in milliseconds. Traditional rule-based systems and frameworks are great at detecting known threats, however they aren’t enough as fraudsters today use new and emerging technologies to create novel fraud strategies or zero-day attacks. The payments ecosystem needs to develop shared intelligence for increased accuracy of fraud detection and prevention. 

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