India’s payment journey has changed significantly over time. What started as a barter system has evolved into cashless payments. From bartering to credit and debit card payments to one-click transactions using payment applications, India has come a long way in its payment journey. And while many people began using new contactless payment methods like Unified Payment Interface (UPI) even before the pandemic, its use has substantially increased after the lockdown. With digital payments gaining market share in India, in August 2020, the Reserve Bank of India (RBI) published a framework to authorize the pan-India Umbrella Entity for retail payments. The framework challenges the dominance and monopoly of the National Payments Corporation of India (NPCI) and encourages growth and innovation in the payment ecosystem. While these changes will bring more options to consumers, they will add more competition in the banking/financial services industry. 

But changes in payment systems are not the only pressure that banks face. The global trade finance market is poised for robust growth, with forecasts indicating rise from  US $4.16 trillion in 2023 to an estimated US $5. trillion by 2028. This sector is growing, thanks to digital interventions and changing corporate needs. The current fundamental upheaval in global trade and commerce requires banks to digitize efforts to make end-to-end connectivity a reality. The dynamic environment requires banks to rethink and rebuild for the future. As a result, payment systems, customer experiences and the financial services industry, in general, will undergo radical changes in the coming years. 

A New Generation of Payments  

With the acceleration in market demand, big technology companies and non-banking players are entering the field of digital payments. The expanding digital infrastructure, rapid migration to digital-driven payments by UPI, the rise in customer preference for contactless payments, increased adoption of digital payments by merchants, and big tech and fintech disruptions will continue to drive the rapid digitalization of payment systems in India. Even messaging apps have started to offer payment services. Currently, Google, Amazon, Facebook, Apple, Samsung and Alipay are players at the forefront of the digital payments industry. 

The influx of non-bank additional players, including tech start-ups and technology behemoths, adds more competition for banks and pushes them to invest in infrastructure that combines blockchain, machine learning, and artificial intelligence to offer customers innovative and customized solutions.

Blockchain technology efficacy 

The traditional method of cross-border payments is riddled with fees, roadblocks, and delays. Blockchain technology can interconnect financial infrastructure across the world. Blockchain enables quick, safe, affordable international payment processing services using encrypted distributed ledgers that offer secure real-time verification of transactions without the need for intermediaries like correspondent banks and clearing houses. As more firms and governments invest in these fields, there is a growing level of confidence in blockchain technologies. The advantages of blockchain in the digital payment world includeCentralized record keeping 

  • Centralized record keeping 
  • Improved security 
  • No third-party involvement 
  • Data is immutable and transparent
  • Faster payments with Smart contracts

Artificial Intelligence and Machine Learning 

Banks have traditionally been at the cutting edge of using innovations to support front-end and back-end operations. In today’s era of AI and ML, banks leverage these technologies to increase operational effectiveness and reduce business risk, as these technologies offer rapid, effective, and secure risk management, customer service, data analysis and credit card fraud detection. Additionally, it can assist businesses in creating solid dynamic models that are better equipped to categorize defaulted loans and even recognize self-cure clients.

Organizations require tools and standardized protocols to develop, evaluate, deploy, and monitor models in a repeatable and industrial manner to leverage various analytics and advanced technologies. Banks should have a centralized data backbone. If data is the bank’s fundamental resource, it must be governed and made secure to allow customers to analyze data sources in real time. 

What to Consider When Updating Payment Systems

The financial payments landscape in India and throughout the world is changing.  Participants must revamp their payment systems to adapt to the changing market landscape. New systems must address many complicated issues, including: 

  • Growing customer expectations: Consumers expect seamless and convenient payment experiences. Participants should revamp their payment system for faster, more user-friendly and more personalized payment options.
  • Security and fraud prevention: Cybersecurity threats and payment fraud are significant concerns for businesses and consumers. Companies must implement robust security measures, encryption protocols, and authentication mechanisms to protect sensitive data.
  • Payment industry innovations: The payment industry is adopting new technologies such as blockchain, machine learning and artificial intelligence. Businesses must embrace and incorporate these innovations to stay relevant.
  • Regulatory compliance: Payment systems must adhere to various financial regulations, data protection laws and industry standards. Revamping systems ensures compliance with the latest requirements, reducing legal risks.
  • Business scalability: As businesses grow, their existing payment system will become insufficient to handle higher transaction volumes. Companies should ensure scalability and innovate to try to accommodate future growth.

With Opportunity Comes Complexities

The payments industry is undergoing massive shifts due to new technologies, rising expectations, integration with other industries, and skyrocketing digital adoption. Not only will payment systems and customer experiences experience a radical change in the coming years, but also financial services in general. Banks should anticipate a steady increase in fintech entering the market, increased customer data monetization, and competing businesses taking a more user-centric stance in response to the growing desire for contactless and expanding digital payments. While payments are getting faster, simpler, and more secure, the sector is becoming more complex. 

IT Service Providers can assist clients in transforming or realigning to emerging business models and payment economics with a new operating model and cost structure. The financial services industry must modernize and simplify its payment technology infrastructures as it will improve the cost base and operational efficiency, enhance agility, and reduce risk. Wipro is already playing a vital role in the payment industry by investing in the infrastructure that combines blockchain, machine learning, and artificial intelligence to offer clients innovative and customized solutions with compelling and differentiated value propositions. While the rapid change in the industry opens many opportunities, there are complex issues to navigate. Technology firms like Wipro are helping clients embrace the paradigm shift in the payments space to implement a future-ready payment solution.

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About the Authors

Vijay Mahadevan Iyer
Partner, Consulting-Financial Services, and Head, India Domain & Consulting Practice, Wipro Limited 

Vijay has 20+ years of experience in Business, Technology, and Solution Consulting with Pre-Sales and Product Management in the BFSI segment. He has anchored and successfully delivered large-scale digital banking transformation engagements in India, Southeast Asia, the UK, Europe and the US. Vijay’s skills include Digital Transformation, Core Banking domain, industry-specific issues and business models.

Nisarga C S
Consultant-Financial Services, Wipro Limited

Nisarga is a solution-driven engineer who analyzes trends and data-driven solutions to produce quality outcomes, successfully delivered RFPs and PoVs for various clients, and executed PMO-led services for one of India’s leading banks.