<p><em>India has the third largest internet user base in the world, after the US and China, and the country is likely to surpass the US by 2015, says <strong>Richard Canday</strong></em><br><br>India israpidly migrating towards atruly digital economy where businesses must reinvent their delivery channels to provide value to their customers. This phenomenon of digital transformation has impacted the baking and financial sector in a big way. An increasing number of customers are choosing to make their payments online through their computer screens or mobile devices. This stage of connectivity is driving digital payments transformation - the migration of cash payments and plastic card payments to payments made over digital channels, either from digital wallets or through new digital payment mechanisms.<br><br><strong>RBI Initiatives For A Cashless Economy</strong><br>In 2012, RBI proactively envisioned and encouraged electronic payment systems for ushering in a less-cash society in India and to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards. The overall regulatory policy stance was oriented towards promoting a less cash/less paper society, the "green" initiative.<br><br>Since then, according to a report by IAMAI & PCI, digital payments in India was expected to touch Rs 1.2 trillion by December 2014, a 40 per cent increase from Rs 85,800 crore in 2013, driven by growing internet penetration, growth in e-commerce and the ease of online payments adopted by the tech-savvy populace of India. The market for payments made through digital medium has grown at a CAGR of 10 per cent in between 2010 - 2013.<br><br>According to latest reports by industry analyst PWC, India has the third largest internet user base in the world, after the US and China, and the country is likely to surpass the US by 2015. More significantly, approximately 74 per cent of Indians own a mobile phone, and prefer the mobile medium of internet access. By 2020 the number of smartphone users are expected to equal the number of active bank accounts in the country.The rising digital economy presents a tremendous business opportunity for banks to tap in to, and private banks are rising to the occasion. In a multi-channel ecosystem, the ability to engage thecustomer through the most relevantchannels has become key to predicting customer behaviour, maximising customer value, and as a result, creating newer and deeper revenue streams forbanks.<br><br>Reserve Bank of India (RBI) mobile banking data for the month of May 2015 reveals that the top five private sector banks have conducted transactions of close to Rs 1.4 lakh crore, almost four times that of those conducted by the top five public sector banks, based on total value.<br><br><strong>Challenges Galore</strong><br>Industry players have been quick to seize the digital opportunity, with many banks launching their own payment applications that integrate big data analytics with the mobile interface. E-commerce players like Flipkart and Snapdeal have their own payment gateways, and the digital wallets industry is replete with entrants like Apple Pay, Google Wallet, Samsung Pay, Mobikwik, Paytm, etc.<br><br>As opportunities flourish, a successful digital transformation by banks will require execution excellence, controlled risk-taking, innovative distribution and careful customer relationship management. More importantly, however, it will demand solid understanding of the facets that truly distinguish this market from others and a genuine openness to innovation and building strategic alliances. The world of digital payments is fast evolving and industry stakeholders must take concrete strategic steps to position themselves strongly within it.<br><br><em>The author is Associate Vice President - Corporate Affairs at Electronic Payment And Services Pvt Ltd</em></p>
