Is the future of payments happening in India now?
India Makes Important Advances in Biometric Payments
In India it’s already possible for a consumer to authorise and authenticate a payment with their fingerprint or iris scan. As a largely cash based economy India has leapfrogged the use of Cards and Smart Phones for point of sale (POS) payments. Will biometric payments become more popular?
Move away from cash
There was a lot of press attention when the Indian Government banned high value cash denominations in an attempt to weed out corruption and bribery.
While the success of the cash ban initiative in curbing corruption is being debated there is another potentially more impactful initiative that has been rolled out by the Indian Government.
Compulsory biometric authentication
The Indian government is rolling out a compulsory biometric authentication database. There will of course be discussions about the privacy concerns around a biometric database for residents. However such a technology has the potential to leapfrog many payment infrastructures and protocols to a simple country and resident wide biometric payment system.
How does it work
By 31 December 2017 each bank account in India must have a resident number associated with it. Resident numbers can be obtained easily at many outlets around the country by simply providing a fingerprint and/or iris scan. All bank accounts will therefore be linked to biometric data by 31 December 2017.
Fingerprint POS devices
Retail outlets can replace their existing POS systems with an inexpensive (approximate cost of $30) fingerprint POS devices which link to a smartphone enabled app.
The retailer rings up the amount at the cash register, the consumer simply scans their fingerprint at the POS device and chooses the bank account from which the payment is to be made.
The authentication and transaction data are processed by a central clearing house and the payment amount transferred from the payer to payee.
There are no costs to the use of the authentication database or clearinghouse. Individual bank accounts may apply fees for outward or inward remittances however these are regulated and for the most common retail payment amounts (below USD 200) cannot exceed the equivalent of $4 cents, so a maximum total cost of 2 basis points.
The smartphone enabled app being used by the payee requires an internet connection to reach the clearing house. However it is estimated that 87% of the Indian population is covered by an internet capable mobile network.
What about the unbanked?
It’s believed that 19% of the Indian population is still unbanked. However, the Indian Government and the Reserve Bank of India (RBI) have made several concentrated efforts to promote financial inclusion. These efforts include the launch of cooperative banks and regional rural banks (RRBs), introduction of mandated priority sector lending (PSL) targets, formation of self-help groups, appointment of business correspondents by banks to provide door-step delivery of banking services.
Imagine a future where you can leave your house without your wallet, without your phone and shop just with your fingerprint. Imagine that to make this payment costs a total not more than 2 basis points and that the payment is instantaneous.
This future is happening in India now.
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