Smarter Payments

In India, Faster Payments Deliver ‘Instant Gratification’ To Migrants

For many Indian migrant workers, sending remittances involves the anxiety-inducing experience of giving cash to couriers or postal services and hoping for the best. In the new Smarter Payments Tracker, Ritesh Pai, YES BANK’s chief digital officer, discusses how India’s emerging faster payment systems, including IMPS and UPI, are putting those fears to rest — and why fast remittance confirmation is as important as the speed of the transaction itself.

Migrants make up a substantial portion of the economy in India. By some recent accounts, more than 100 million migrants are participating in the nation’s workforce — one-fifth of the nation’s workforce. Many of these workers travel from rural, low-income regions, hoping that work opportunities in urban areas will enable them to support their families. As such, it’s common practice for these workers to send a portion of their wages home to their families. Many of these workers have traditionally been paid in cash, however, meaning they’re likely to encounter uncertainties when it comes to transferring money. 

Ritesh Pai, chief digital officer for India’s YES Bank, pointed out that India’s heavy reliance on cash in the past meant that workers had to send their wages back home via the postal service or a cash courier — a process that could take days, leaving workers worrying about their funds’ whereabouts. 

India’s financial ecosystem underwent several shifts after the country made the move to demonetize, resulting in payment rails such as the Immediate Payment Service (IMPS) and the Unified Payments Interface (UPI). These systems, Pai said, are pushing the adoption of electronic payments among the country’s vast base of migrant workers. 

“There is so much operational efficiency,” he said. “From an instant gratification standpoint, the moment the money is sent, [they] get a notification that the beneficiary’s account has been credited. … The speed is immense.” 

A Remittance Game-Changer

IMPS and UPI are proving to be game-changers for India’s migrant community, Pai said, as FIs are able to connect to these networks and offer fast transfers. YES Bank’s own remittance service, YES Money, allows migrants to give cash to correspondence agents, who then initiate remittance transfers. The agents are able to give workers instant confirmations that the money has been delivered successfully to the correct account. 

“Within three to four seconds, the remitter gets a notification that the recipient account has been credited,” he noted. “[He’s gone from a] scenario where he was always operating in a state of uncertainty because he never knew if the person taking the money would end up delivering [it], to where he’s getting instant gratification before he leaves the outlet.” 

The speed of confirmation is just as important as the speed of delivery because workers can feel confident that the transfer was successful. Services like these, Pai said, will help spur broader adoption among migrant workers who are looking to securely and quickly send funds. 

Workers’ anxieties don’t just involve speed and security, however. Remittances are associated with high fees, which can eat away at the total value of the transfer. Pai believes, however, that even if there are fees, workers will continue to use these services. This is especially true now as remittance fees for transfers made on India’s new payment rails are usually only around 1 percent of the transfer’s value. 

“These are make-or-break moments in developing the pace of any payment system,” he said. “They will never change back even if charged slightly higher because they realize the importance of the speed, security and timely delivery of the money.”

India’s Digital Finance Roadmap 

IMPS and UPI are changing the way both migrant workers and the rest of the nation transfer money, surpassing the West in terms of payments. 

“Historically, India has always followed the west when it comes to payments,” Pai explained, noting that many payment methods, including credit, debit and prepaid cards were first launched in the west before they were introduced to the Indian market. 

Today, that pattern has shifted, resulting in India leaping over the West’s lagging payments systems. The U.S. is still working on adopting EMV-based cards, with only 70 percent of storefronts now EMV ready, for instance, while India mandated nationwide EMV adoption at banks and ATMs as of Dec. 31, 2018. 

“We’ve improved upon what we learned from the west … [with] more commendable, homegrown payment systems that many companies are trying to emulate,” he said, adding that UPI is now being considered a model for other countries looking to create their own faster payments systems. 

These systems aren’t just changing how migrant workers look at payments, however. They’re also being utilized by banks, SMBs and corporations that are interested in tapping into real-time payments. Indian consumers are also coming to appreciate faster transactions, and they’re encouraged to choose the payment methods that best suit their individual needs. 

“In India, there will never be a one-size-fits all solution,” Pai said. “Finally, convenience is something the customer can experience, and they [are] the best judge to determine which is the best payment method for them.” 

Migrant workers now have increased payments speed at their backs when the send money home, and with that also comes peace of mind, regardless of the method they choose. 

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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