[Guest article by Indus Khaitan, Partner @themorpheus. Though he has shared his personal experience, the crux of this article lies towards the end of it. So read on.]
I still do not have a valid credit-card in India. The KYC (due-diligence mandated by the government aka ‘Know Your Customer’) norms require that you have an office (or fake it) but must have a land-line at office. If you work from home then you are out of luck! Does not matter how much money you have in bank or a few international credit cards to carry around. I have a debit card which is not accepted by any online portal (Thanks to Hongkong bank).
Net, net. I’m just like the other 88% Indian population which does not have a debit card or the other 98% who do not have a credit card. But, the good news is that I’m part of the 500m population who has a mobile phone.
As a result, I’m not able to show my purchasing power to the various portals selling books, gadgets, t-shirts and other trinkets online. I’m not able to show my fickle mind by making a purchase of Rs. 300 and being happy about it.
Prepaid or “stored value” card (or cash card) may be the solution, but they have a very poor distribution and I have to go out and buy a card from a travel agent; if you are lucky to find an agent carrying the cash-card.
Banks in India are busy in shoring up their mobile banking offering a la check your balance, make fund transfer, etc. I don’t know why there is so much push for mobile banking as the urban population
; the users of mobile banking via a GPRS connection, already have access to ATM and Internet which can be used to do the same functions in a larger form factor.
Though Reserve Bank of India (RBI) has been raising the transaction limit of moving cash from the mobile; the problem is that the whole thing is tied to a bank or a credit card, which makes the installed base the same 2% for card holders and 12% for debit card holders or netbanking customers. So much so that RBI has allowed transactions to happen without using the traditional encryption techniques used in issued card-based transactions, but there has not been much uptake.
RBI does not want the operators to become banks, which is very valid as it would give rise to money laundering and of course operators then would dis-intermediate the banks. However, most operators are already making tonnes of money on VAS like premium SMS, ringtones, downloads and such. Why there aren’t any instruments which allow me to do a payment transaction which is not attached to a card or a bank account for things which are not sold by the operators? The lack of the same led to the downfall of mchek, they are on 100m phones but then only a fraction of the owners have a credit card or a bank account.
What is needed here is innovation to allow purchases to be done through the phone directly and billed to my monthly statements or debited from my top-up. Banks are too big to be worried about longer tail of small value transactions, operators do not have the teeth, nor the desire to deal with the complexities of 3rd party purchases flowing through them. The laws are falling in place, consumers are ready to make those purchases — missing is the technology piece and a desire to experiment in these areas. This is a space to watch. The potential is beyond imagination when convergence of commerce and owners of mobile & users of internet takes place.
PS: So how do I buy tickets for the travel I do? I call up a few good friends to get it done and pay them cash later.
[The coin shown above was used by a minor dynasty in coastal Karnataka called Alupas. Pic courtesy of Reserve Bank of India (RBI). Pic from the road to startup gurukul.]
[Reproduced from author’s blog]
Axis bank has a scheme called Easy Credit Card which basically gives you a credit card against a fixed deposit. Your credit limit will be 80% of the deposit amount and you will continue to earn interest on the FD. It’s very hassle-free and no salary proofs etc. are needed. You should have a look at that.
Good tip!
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I am not sure(did not read/used in details) what type of service they are offering, but here is one article which talk about Yes bank mobile money transfer.
http://teck.in/nokia-mobile-money-transfer-at-yes-bank-rbi-approves.html
Regards,
Manish
Indus, I think its not technology but still regulatory that we arent seeing mobile enabled services. If you look at a player like comviva (disclaimer: I dont work there) they have offered some really nift mcommerce solutions around the world from cameron to bangladesh and from barclays to bottom of pyramid. I think its still regulatory and really allowing for all three business models i.e. bank led, telco led or collaborative/mvno based
Regulatory to some extent yes. If you take the RBI’s directive into account, there have been some positive announcements, however, lot of other hurdles still remain with regards to integration / ledger / accounting level, the technicalities of which cannot be comprehended in this small comment.
Is payment A problem? Yes.
Is payment THE problem? No.
IRCTC is able to sell tickets worth Rs 500 Crore every month online. And they don’t offer COD.
I think, online services need to be so compelling that people can tolerate the friction of payment.
Wealth creation happens when vitamins become necessary like aspirin. IRCTC is a necessity, millions of people traveling everyday. Imagine the amount of inefficiency in everything else where we exchange money — this is what payments could solve.
$189 billion of e-commerce in US is made possible because of few innovations in 1993 which suited that culture, and does not in a larger part in India.
Entrepreneurs can either wait for the perfect payment system to show up automagically or go ahead and build something valueable in spite of the problem. Flipkart has taken the second approach and seems to be doing quite well. For the start, we need more of them.