April 19, 2023

Convergence of Payment Systems

Emerging Markets - Trends & Evolution

2

Payments in Emerging Markets – Setting Up the Pace

•Modernization of Payment Systems • Payment Systems at the heart of financial growth• Inclusion approach on Banking • Risk Management • Increased Govt spending on Infrastructure

• Growth of The Banked • Over 3 crore no-frills account opened in 3 years • Adoption of electronic payments by the mass customer

• Debit Cards - 50% CAGR in India over last 5 years

• Growth fueled by New Channels •Increased e-commerce activities

• 80% CAGR in Internet based Payments over last 5 years•Mobile Banking & Payments

• Mobile Payments across the world expected to double in 2 years

• Innovation in Market place • Mobile: M-PESA• P2P Payments opening by Non Banks

3

Convergence of Payments – Shaping up the Future

Com

petiti

on

Regulation

Customers

Innovation

4

Customer Driving the Convergence

• Merchants – POS operations and settlement • Corporate - Single Window – Single View • SMEs – Price Effectiveness and ease of settlement B

usin

ess

• ATM & Kiosks – Expanding the service options • Mobile - High availability and Excellent Response • Branches – Digitization of the paper instruments

Mass Customer

• Internet , Mobile – Superior Experience , Value Added Services • Cross Border Remittances – Better SLAs •Channel Hopping & Cross Channel Processes

Upward Mobile

• Integration of payments into e-Governance• Internet - Enhanced MIS and Monitoring Capabilities • Digitization of Bulk instruments & Processes

Gov

ernm

ent

CitiTap - India

ZAP Mobile Payments – Tanzania, Uganda & Kenya

‘E-zwich’ - Ghana

China Union Pay

Rural Smart Cards - LatAm

5

Convergence of Payments – Shaping up the Future

Com

petiti

on

Regulation

Customers

Innovation

6

Regulations Facilitating the Change

• Fragmented Payment Systems

• Restricted availability of Clearing and Settlement window

• Lack / Multiplicity of validation procedures

• High risk of fraudulent activities

Today

• Centralized and Inter Linked Payment Systems

• 24 X 7 availability for low value payments

• Standardization of Identification & Validations

• Increased Electronification of Payments , Centralized databases to reduce risk of Frauds

Tomorrow Sistema de Pagos en

Moneda Local (Brazil

and Argentina)

East African Payments System Harmonisation

Committee (East African Countries)

Payments and Settlement Systems

Act; Establishment of NPCI (India)

7

RBI Vision of Payments in India

• Payment and Settlement System Act 2007 • Set up of NPCI • Promotion of electronic modes of payments• India Money Line , India Card , Centralized ACH

• Increased responsibility on the Banks for enhancing the Payment Networks – Banks are in the centre of all transactions

• Aligning the strategic objectives around Payments – Reusability of Payment Services across business functions

• Strategic review of Payment Systems inside the banks and preparing for the future world of non stop payments – faster , easier and cheaper !

8

Financial Inclusion

• Introduction of ‘no-frills’ accounts • Freeing up of Bank branches and ATM expansion• Allowing various entities to act as Business Correspondents• Simplified KYC norms

• Strong focus on financial education and financial inclusion as market opportunity is recognized by most banks

• Initiatives to drive down costs through infrastructure sharing and technology innovations

• Strategic review of current business models to ensure the hurdles of last mile connectivity are done away with

9

Convergence of Payments – Shaping up the Future

Com

petiti

on

Regulation

Customers

Innovation

10

Innovation – The Perpetual Driver

Mobile & NFC

Smart Cards

Internet Payments

Social Networking

Huge Untapped Market

Quick and Convenient

Capable of Displacing Cash

Technology to play a major role

Can provide ‘Top-of-Wallet’ status

Suica in Japan & Octopus in HK

Increased time spending on these forums

Extend Banking Services apart from marketing & Branding

Large reach at minimal investment

Apprehensions over security and privacy

Taking success of cards to the next level

One card does it all

Safe and Secure

Tool for Microfinance and Financial Inclusion e.g. Rural Smart Cards in LatAm

Witnessing unprecedented growth all over

Comfort and Convenience

Broadened product offering such as GiroPay, PC Pay, EPS etc.

Enhanced security- virtual keyboard, virtual card, multi-facto authentication

11

Convergence of Payments – Shaping up the Future

Com

petiti

on

Regulation

Customers

Innovation

12

Defining the Competitive Landscape

Acquisition : Merchant Services & ePayment Gateways - P2B and B2B business, tremendous opportunity for brand building and increasing retail customer base

Corporate & Business : Accessibility through channels with minimal user intervention, Wide Coverage, Extensive reporting & alerts and capability to Provide Single Window Service SMEs : Wide distribution , Availability of easy to use channels, Introducing new services in collaboration with MSPs, Faster Settlement Services for Banks : Currently at group consolidation level – white labeling likely to emerge as a key driver for ROI

• Channel (Cross !) Experience is set to be a key differentiator

• Reusability of Payment Services will provide opportunities of maximizing RoI

•Scalability of the servicing platforms will provide the required foundation for sustaining growth

13

Enterprise View of Payment Convergence

Expandability Experience

Scalability Security Collaboration

Channel

Messaging Ease of Integration Flexibility

Lack of standards Security Customer Adoption

CoreEngine

Consolidation Rule Driven Specialization Value Addition Business Intelligence Technology

Migration Evolution Customization vs Standardization Scalability

Booking / Accounting

Real time Payment Information

Real Time Integration of IT Systems

Clearing & Settlement

Standards Centralization

Integration of IT Systems Service Levels

Building the right business case

Long Term view with Marked Quick Wins

Choosing the right Partners

14

Evolving Trends in India :Rapid Growth of Electronic Payments

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004 2005 2006 2007 2008

Volume

-

Lakhs

ECS-CR Vol ECS-DR Vol EFT Vol CrCard Vol DrCard Vol

0

100,000

200,000

300,000

400,000

500,000

600,000

2003 2004 2005 2006 2007 2008

Amount

-

Crores

ECS-CR Amt ECS-DR Amt EFT Amt

CrCard Amt DrCard Amt

15

Evolving Trends in IndiaMobile Phone based Payments» Deep penetration of mobile phone across

social and economic status» Recognized as a feasible model for financial

inclusion owing to coverage and low cost» India has adopted the ‘Bank Led Model’ » Regulations like KYC, AML, CFT and STR apply» Transaction amount limits applicable

Pre Paid Cards• Another channel to mobilize financial

inclusion• Can be used within the existing card network• Expandable to other technologies like internet

wallets, smart cards etc• Regulations like KYC, AML, CFT and STR

apply• Loading limits applicable

India Post

Collaboration between Banks and India Post exists for financial inclusion. However• India Post aims to computerize and network all post offices by 2011-12• Will aggressively seek for MOUs with State & Central Government for social security schemes• Aims at 100% increase in revenue from financial remittances and 50% increase in revenue

from savings accounts by 2012• Targets financial inclusion growth of 10% in the next 5 years

16

Evolving Trends in IndiaNREGA

»Coverage : all districts, 3 Cr households

»Challenges in Payment transparency»Last mile IT reach not available»New payment methodologies being

explored

Fertilizer Subsidies

• Direct payment to farmers

• New process and modalities have not been finalized

• Strong possibility for all such government payments to finally gravitate to a common platform

Other Game Changers

• NPCI - Retail payments

– Consolidation of various retail payment systems. Creation of national ACH

– Introduction of India 24 x 7 for faster and round-the-clock funds realization

• Strong drive for financial inclusion

• UID Introduction

17

Development and Implementation of TCS BαNCS for

Payment Programs of Large Financial

Instttutions

Application Maintenance for multiple payments application Development for Large Financial

Institutions

Providing BPO services for operations

across 21 counties processing 150 MM

transactions annually

TCS Research & Innovation work for new and upcoming

IT Trends

Development and Maintenance of

Payments Clearing Infrastructure (LVP) for

India

Product Development &

System integration

Early Adaptor of standards & technology –

SOA, XML/ ISO 20022

Knowledge and Thought sharing

with Industry Specialists

Participation to Banking &

Payments forums – EBA, SWIFT,

MPFI, IFX

TCS Payments Expertise

Product DevelopmentProduct Development

Application ServicesApplication Services

BPO ServicesBPO Services

April 19, 2023

Thank You!