East meets West in India’s digital gateway

By Leila Fourie, CEO at AusPayNet – 17 December 2018

On a recent visit to India, I had the pleasure of meeting Sharad Sharma, a prolific and renowned innovator previously from Yahoo! and the mind behind India Stack, the API ecosystem with the ambitious goal of connecting India’s population digitally.

Sharma often puts forward two thought-provoking ‘panic CEO questions’:

  • ‘Do you think the bank will change more in the next 5 years than in the last 30 years?’ 
  • ‘Do you know what banks will look like in the next 10 years?’

They made me think about the implications for transformation and the pace of change.

Sharma challenged the Gretzky reference I made in a blog earlier this year, about skating to where the puck will be. The point he makes is ‘How do you operate in a world where you don’t know where the puck will be?’

Sharma believes that MBAs and traditional thinking are predicated on the assumption that you know where the puck will be. But as everyone knows, we are experiencing non-linear change, to which there is no order. We need to do things differently. So how do we learn to operate in the new world? Put another way, if we don’t intentionally ‘unlearn’, how do we create the space to construct new mental models?

India seems to have established the perfect environment to consciously unlearn and create the space to understand new emerging payments models.  There were many parallels in India to the digital growth explosion seen in China over the past decade.

Context for growth

India is experiencing unprecedented growth, fuelled by expanding digital infrastructure and digital consumption and increasing adoption of technology. A defining feature of the Indian economy is that 83% of transactions are cash, which translates to a one trillion- dollar displacement opportunity.

Like many emerging market economies, India is not constrained by legacy technology. For example, India hosts 40 million merchants, but only 3 million of these merchants accept cards.  Social media is an effective growth node. India has the largest numbers of Facebook and WhatsApp users in the world and while Indians have some 78 apps on their phone, 50% of their time is spent on WhatsApp. Indians spend on average 4.5 hours on their phone, and the penetration of smartphones is growing rapidly.

India’s young population – 65% of Indians are aged under 35 years old, and more than 50% under 25 – means digital transformation should be faster and easier. I was fascinated by the telecomms revolution underway in the country. Voice is essentially free of charge, and the cost of data is no longer a constraint. Indeed, the only real constraint to accessing data is your mobile phone battery. In Mumbai, it was intriguing to see a Diwali festival promotion in a local retail store offering a $300 per year package (yes, you read correctly) with unlimited data and voice calls!

The Indian market is ripe for disruption and it’s happening before our eyes. The country’s digital growth transformation is built on three pillars:

  1. Aadhaar infrastructure based on UIDs issued by the Unique Identification Authority of India. Under this system, every person’s demographic and biometric details - 2D facial recognition and thumbprint – are captured and codified in a unique 12-digit number (Aadhaar) allocated to each citizen. UID came primarily as a subsidy from the government – now, more than one billion Aadhaar IDs have been issued and banks have used these to on-board 736 million bank accounts. Five hundred million new accounts were opened through Aadhaar over the past year.
  2. Common infrastructure and a shift to open APIs enabled by solutions such as UPI and India Stack. These link to Aadhaar, which has made integration simple. Many of the non-traditional players have leapfrogged existing payment rails and leveraged India’s United Payments interface to build scale rapidly.
  3. Demonetization. While arguably contentious, experts in India argue that this did more for digital initiatives than anything else. Previously 85% of cash was not accessible overnight; demonetization has forced banks to digitise their experience.

These pillars are proving to be a firm foundation for creating a new way to pay in India. While we don’t know where the puck is moving, there are clear paths being forged and what we’re seeing in India could well be the template followed by other economies.

Where is the puck moving?

The explosion in e-commerce is driving huge investment in India. India’s world-leading e-commerce growth of 33% CAGR is where East meets West. Giants like Alipay from China are invested in PayTM (the largest wallet provider) and Western tech and social media platforms like Google, WhatsApp and Amazon are also investing heavily. This Diwali, Amazon delivered to all but two zip codes in India.

Social media penetration in India is the trigger for expanding access to payments and credit. The WhatsApp payments beta pilot in India earlier this year involved one million consumers, and WhatsApp is said to be applying for a banking license. Given the sheer number of Indians using WhatsApp, this would be a huge game changer. The intersection of messaging apps and shopping, otherwise known as conversational commerce, enabled by voice will make the process intuitive. Amazon is likely to proliferate into offline sales. Some experts argue that the biggest explosion will happen when online commerce and social media merge; observers on the ground in India predict that this is likely to happen in the next six months.

The data explosion and transition to digital is creating data that is shifting beyond payments, democratising credit, and expanding offerings to include new solutions like lending and wealth. Growth in public cloud services is doubling. New payments form factors are rapidly building scale: QR - BharatQR, PayTM, HCE, SE, MST, Samsung Pay and sound-based payments for feature phones to name a few. The four-party model is becoming a multi-party model with new parties interposing themselves into the process.

While adoption rates of new digital solutions are high, the local business community believes that the revenue pool is still largely in the future. For example, Google has onboarded 45 million people on Google Pay in under a year, and it is free. Notwithstanding evolving and unclear revenue models, most of the newcomers have lofty acquisition targets. Google’s unit, based in London, is called NBU- next billion users. Meanwhile, PayTM, which describes itself as India’s ‘most sincere bank’, publicly proclaims that ‘we will bring half a billion Indians to the mainstream economy’ within three years.  


India’s digital transformation builds on the China innovation story of the past decade. But could India be the gateway to the rest of the world in digitising the economy? Will India open the way to reaching the unbanked in emerging markets and improving customer experience in developed worlds?

Only time will tell exactly where the puck is moving. Senior executives working with traditional banks told me that if they’re able to give customers the experience they want, they will survive. They realised that if they want to grow fast, they need to do so in partnerships. Fintechs are the exoskeleton onto which banks will evolve to make themselves faster and more sophisticated. The incumbent banks are also focusing on user experience and vastly simplified products.

While we don’t know where this transformation will end, what we can say is that the gorilla in the room is trust. Those organisations that partner well, own the front face of the customer experience and forge trust among their consumer base are likely to be the winners in the race to reach the puck.