The Role of Payment Wallets In Digitizing India

digital payment, payment gateway, payment wallet

The e-commerce and online purchase industries have only seen better days since the emergence of digital payment modes.  Add to it the demonetization drive by the sarkar leading to the mushrooming of the digital payment platforms like Net Banking, Magnetic stripes, UPI, QR codes and payment wallet.

What’s A Mobile Wallet?

digital payment, payment gateway, payment wallet

A mobile wallet is a type of virtual wallet service that can be used to pay and receive money digitally via a mobile app. It is one of the most preferred modes of digital payment in the retail sector, akin to the role of a payment gateway in the e-commerce industry. The mobile wallet stores your bank account or debit/credit card details in an encoded format to allow secure payments. This e-wallet acts exactly like a physical one where you can add money to make payments and purchase goods & services. This eliminates the use of the direct bank to bank transactions. Many banks in the country are leading the e-wallet services along with a few private players, some of the popular ones in India being Paytm, Mobikwik, Freecharge, etc. The various services offered by mobile wallets include sending and receiving money, making payments to merchants, online purchases, etc.

How This Works For The Wallet Users

digital payment, payment gateway, payment wallet

In the Master Direction that was issued last year, the RBI has laid the groundwork for the interoperability between payment instruments, particularly prepaid ones. This interoperability will allow users of one wallet to transfer money to a user who prefers a different one. The RBI has further enabled issuers of PPIs by allowing them to also issue physical cards to their users.

Previously, restricted by acceptance, the average wallet user often found themselves juggling money between various wallets. This helps with your local grocery store deals too where it’s not mandatory for both of you to have the same app to make a digital payment. Interoperability allows multiple wallet apps to communicate with each other. This reduces the reliance on cash for menial transactions. Cards have an established reputation in being compatible and universally acceptable among all merchants. If wallet companies start issuing cards to users, there would be a significant rise in the adoption of digital transactions. This would largely benefit the service providers as it would mean a greater variety of offerings.

What This Means For The Service Providers

digital payment, payment gateway, payment wallet

This move (interoperability) by RBI has ensured that the big players do not eat up a huge chunk of market share. Big players do have an advantage over the small ones in terms of merchant onboarding since it requires pouring larger investments. As interoperability opens up new avenues for smaller players, it provides an impetus for them to cover up what they missed during the great demonetization wave that had gripped the country a few months back.

Up until now, only banks were designated to issue cards to the users. After the master directives, however, the wallet companies can partner with card-networks to issue chip and PIN-enabled cards to their users. This means users can withdraw cash from their e-wallets whenever required, thereby adding to their convenience.

To summarise, digital payments or cashless transactions can bring about a great deal of change in the economic status of India and the way we deal in our day-to-day life. Being cashless is easy, burden-free and ensures ‘white’ dealings with a digital record. However, only 12% of transactions in India are made electronically currently. This step of making digital transaction interoperable can provide the much-needed boost for e-payments.

The NPCI has made commendable efforts in promoting cashless transactions via UPI, QR, BillPay and other services. Interoperability will further ensure mobile wallet players will join hands with banks in the quest to digitize transactions.

Mindgate’s Virtual Account Management solution

Mindgate’s Virtual Accounts solution coupled with its payment-on-behalf-of (POBO) and collection-on-behalf-of (COBO)

The global digital payment revolution has offered fertile conditions for improving efficiency and refining cash management operations for corporates to take advantage. Virtual accounts offer a particularly compelling option. Mindgate’s Virtual Accounts solution coupled with its payment on behalf of (POBO) and collection on behalf of (COBO) offerings which see a central account issue and receive payments for multiple subsidiary accounts is built with this intent in mind.

This in-house banking structure enable corporates to channel payments and/or collections through a single legal entity, which allows to rationalize their accounts and simplify cash management structures by eliminating physical and notional concentration

Features Include:

– A single-account banking structure; To reduce the typically complex bank structures of corporate industry

– Boil down banking structures; ‘n’ Number of accounts at ‘x’ Number of banks, involving a wide range of currencies, into just one account

– Structured payer identification & real-time reconciliation; Streamline the corporate collection process and provides accurate information on the collection statistics

– Distribute the day to day processing; Consolidate the management and reporting to centralized operations, handle micro level access to distributed user range

Highlights

  • Multi-Country IBAN handling
  • Multi-Currency handling
  • Multi-Hierarchy (Parent-Child Mapping)
  • Dynamic VA creation on the deal based for direct Invoice Presentment
  • Enhanced API based VA creation to support Hierarchy & Currency
  • Reporting of VA Statements in MT940/MT942 formats

Features of its POBO and COBO Offerings:

POBO

  • In-House banking setup
  • Entity setup and linking of various level VA for pay-out process
  • Provisioning of Budget and SI/ad hoc pay-out functions
  • Multi-Model Budgeting – Percentage / Fixed based on collection & Pre-Funding Model
  • Rule-based pay-out using SI module
  • Mapping of third-party bank accounts and handling of pay-out using MT101
  • Beneficiary templates for ad hoc pay-out process
  • Authorization matrix setup as per corporate signing limits
  • Entity-level reporting

COBO

  • Entity setup and linking of various level VA for the reporting process
  • Multi-Hierarchy (Parent-Child Mapping)
  • Mapping of third-party bank accounts and aggregation of account statement using MT940 reporting
  • Consolidated account position reporting – Country / Currency / Bank wise
  • Handling of fund movements based on account balance position
  • Unified account number pattern for In-House VA & Third-Party bank Account VA mapping
  • Reporting of VA Statements in MT940/MT942 formats

Benefits:

  • Centralized treasury operations – Better cash visibility and optimization
  • Capability to initiate or receive payment in the virtual account while hitting real account from debit/credit
  • Optimized cash flow – Help clients manage their working capital better
  • Lower costs – Lower transaction cost, administrative and fund transfer cost for physical accounts
  • STP reconciliation capabilities ­­- Reconciliation at the virtual account level
  • Better tracking of intercompany funds