Sometimes it takes a catalyst.
Consider the case of India. With a population of a little over 1.3 billion people, India is the second largest nation on Earth. And until early November, it was one of the most unbanked and underbanked places on the planet. Roughly 85 percent of the total population is — or was — without a bank account. India’s unbanked population is so large, in fact, estimates make it equivalent to the eighth largest nation on Earth, larger than Russia, Japan or Bangladesh.
But quite literally, overnight, that all changed with Prime Minister Modi announced that he was eliminating the 500- and 1,000p-rupee notes from circulation. Just. Like. That. And while various media sources and analysts forecasted an economic apocalypse in one of the world’s biggest up-and-coming economies, the team at Visa seized the opportunity to introduce calm — and commerce — to the chaos that was unfolding in that market.
“We had done a lot of work on a product we had called mVisa, which was QR-based payments, specifically scanning merchants QR codes as static presentation at merchant POS and then essentially using the Visa network to push payment to the receiving merchant,” Visa’s Senior Vice President, Digital Solutions Sam Shrauger told Karen Webster in a pre-Mobile World Conference briefing.
This was a product and a specification that was well-suited to be quickly deployed in a market that was hurtling toward digital payments. mVisa quickly became the core spec for an interoperable QR code–based digital payments platform — one that Mastercard and RuPay quickly agreed to leverage in an effort to ignite digital payments.
That system got its public introduction to the world last week in the form of Bharat QR code and is front and center this year for Visa at MWC. But the story is only partially about India — it’s also about what this real-time experiment in moving an entire economy to a digital method of payment can teach the rest of the world.
The Real-Time Experiment In Digital Payments
As Karen Webster said, taking an economy of over a billion people who mostly interact in cash and more or less deciding overnight that the era of cash-dependence will end is a “pretty gutsy move.”
And a move that turned the country upside down — and one that is still dealing with its aftermath. Long ATM lines and wildly disgruntled businesses nationwide were suddenly faced with massive friction given the lack of POS terminals and the cash-centric nature of doing business.
Customers have cards in India, Shrauger noted, but outside of a few narrow use cases (withdrawing cash from an ATM), the expense of installing and maintaining typical payment terminals — and the technological difficulties involved in getting them up and running — simply wasn’t appealing to merchants.
“[India] is a market where the terminalization costs were higher than what was going to be the market clearing price,” Shrauger noted. “So being able to take payments off a mobile phone as opposed to a POS terminal was going to be more economical. And from a population standpoint, it was never the case that consumer didn’t want to use cards, but that the utility is limited by acceptance and the use cases in which they were helpful in.”
But, Shrauger noted, QR code–based payments via the mobile phone hav opened up opportunities in India — use has expanded, even in areas one might not expect. Common Sky, a satellite TV provider, allows customers to pay by QR code by flipping to a certain channel on their television and then scanning and paying with their phone.
“We didn’t think it would be the first use case, but it shows the power and flexibility of QR as a form of payment,” Shrauger noted. “It quickly became clear that in a largely cash-locked society where paying a bill can turn into an all-day activity, the market was going to teach Visa (and all other digital comers) what the best uses of the digital technology will be.”
And though India is a rarified environment, Shrauger told Webster, there might be a lesson in that for all of digital payments moving forward.
A Textured World
In India, this wonderful petri dish for making the move to digital payments and an entirely greenfield to play one, Webster queried, why would we even be talking about plastic cards? Shrauger agreed that it’s possible that plastic cards may never catch on — and may be largely leapfrogged by digital accounts linked to QR codes. But more importantly, he explained, it’s not about correctly guessing a winner — because in his mind, there isn’t going to be one winner, or at least no one winner in one place.
Interoperable QR makes sense in India because “if you don’t have to operate complex payments terminals, why would you?” Shrauger said.
But for the rest of the world, there are many ways card information linked to consumer accounts can be transmitted, and Visa’s goal is to find all the vehicles by which card information can be transmitted in context and determine how to put that in the simplest form for the consumer.
“Do I think we are going to see QR readers pop up everywhere? No — I think it is a large investment for merchants that probably doesn’t have a concomitant reason right now,” Shrauger noted. “But what we saw with mPesa is what a world beyond cards could look like, and we are seeing a lot of the same things with emerging use cases in developing economies right now.”
The headwinds — and tailwinds — in the developed world are going to be different — NFC, he asserted, has gotten a big boost by EMV adoption — which he believes over time will drive more adoption of payments that leverage those technologies, such as Apple Pay, Android Pay or issuer wallets.
“Over time, we are going to see more and more of the plastic-less transactions happen. The might be on phone, wearables, rings, card-in-the-cloud — it will happen in a lot of ways, but I don’t think there will be a one particular vector that drives that,” Shrauger said.
In other words, unlike the plastic card to rule them all, one size definitely does not fit all in a digital world.
And this week at MWC, Shrauger and Visa will tell the world about how they’re leveraging their global payments platform, standards and specs to meet local market needs and financial institution, consumer and merchant use cases within a global commerce framework that will power digital payments everywhere that Visa wants them to be.
“Our job is to anticipate what protocols may be used as a form of payment and build a spec for it to be used. Whether it takes off or not is for the market to decide, but we’ll have a solution and spec for when and where that technology is required,” Shrauger noted. “I think it will be the same thing with IoT and many other would-be points of payments initiation. We have methods to make commerce possible via those endpoints and technologies when the time comes.”
And the time, he noted, is possibly coming more rapidly than it may have seemed in the past. After all, if India can make a quantum leap forward in payments in less than a year and break 1.3 billion people’s dependence on cash, perhaps nothing is impossible.