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E-PAYMENT TRANSFORMATION AND

ITS IMPACT ON BANKING INDUSTRY

By:Pinky Gupta (15248)

Amay Mandloi (15249)
Marilica Lobo (15251)
Hirak Parmar (15252)
Akansha Vashistha (15253)

What Is E-payment?
Electronic Payment is a financial exchange that takes
place online between buyers and sellers.
The content of this exchange is usually some form of digital
financial instrument that is backed by a bank or an
intermediary, or by a legal tender.
Methods of electronic payments include credit cards, debit
cards and the ACH.
For all these methods of electronic payment, there are three
main types of transactions:
A one-time customer-to-vendor payment.
recurring customer-to-vendor payment.
automatic bank-to-vendor payment.

EVOLUTION OF
ELECTRONIC PAYMENT
SYSTEM

188
7
Edward bellamy
introduced the
concept of Credit
card.

Electric
Money Was
Born

IDC was
Created

American
Express
Emerged.

195
8

191
8

194
6
The 1st Bank Card
was Introduced

195
0

First
Networked
ATM.

196
8

ACH Was
developed.

197
2

Continu

NACHA was
Established

197
4

The 1st Debit

Card was
Issued
The 1st
B2B
Electronic
Transactio
n

The 1st
Online
purchase

197
8

E-Commerce
was born

198
1

Discover Card
was Introduced

198
4

197
9

198
6

1st electronic
merchants
a/c.

198
7

Continu

EMV
was
initiated

199
4

US national
science
foundation lift
restriction

1st
contactless
payment
system

200
6

1st
contactless
payment
system

199
5

199
6

Google
checkout
was
launched

199
7

200
7

1st Digital
wallet

200
9

1st Digital
Currency

Continu

201
1
Starbucks
Accepts mobile
payments
nationwide.

201
2

A PARADIGM SHIFT: ONLINE

AND ATMS USAGES

The wide scope and ease of online banking has led to a

paradigm shift from traditional branch banking to net

banking
Around 44% people are using Net banking, which
remains
the most favourite mode of payment among internet
users in

No of ATM
2006
2010
2014

2007
2011
2015

2008
2012

189
176
142

India.
87

Extensions for facilities such as fund transfer, account

maintenance and bill payment at ATM stations have
reduced branch banking footfall.
The increase would take the number of ATMs per million
population from 189 in 2015 to about 300 in 2017.

2009
2013

35 44
27
22

105

60
In thousands

PAYMENT AND SETTLEMENT

SYSTEMS IN INDIA, VISION 2018

VISION 2018 IS EXPECTED TO RESULT IN:

I.

Continued reduction in the share of paper-based clearing instruments.

II.

Consistent growth in individual segments of retail electronic payment systems

viz., NEFT, IMPS, card transactions and mobile banking.

III. Increase in the registered customer base for mobile banking.

IV. Significant growth in acceptance infrastructure and
V.

Accelerated use of Aadhaar in payment systems.

(CONT)

PAYMENT SYSTEM INDICATORS

ANNUAL TURNOVER
Volume(million)

Value(billion)

2013-14

2014-15

2015-16

2013-14

2014-15

2015-16

RTGS

81.1

92.8

98.3

734,252

754,032

824,578

NEFT

661.0

927.6

1,252.9

43,786

59,804

83,273

Immediate Payment
Service (IMPS)

15.4

78.4

220.8

96

582

1,622

Credit Cards

509.1

615.1

785.7

1,540

1,899

2,407

Debit Cards

619.1

808.1

1,173.5

955

1,213

1,589

Prepaid Payment
Instruments (PPIs)

133.6

314.5

748.0

81

212

488

Grand Total

3,711.1

4,716.6

7,046.6

1,499,5
70

1,580,6
17

1,723,4
25

RECENT DEVELOPMENTS
IN INDIAS PAYMENT
SYSTEM

Date Implemented

Payments Entity/Policy

September 2008

National Automated Clearing House

December 2008

National Payments Corporation of India

November 2010

Immediate Payments Service for mobile

payments

February 2012

Online verification of Aadhaar universal

identification cards

March 2012

RuPay electronic payment card scheme

July 2012

Aadhaar Payments Bridge System

October 2013

Aadhaar-enabled Payment System

August 2014

National Mission for Financial Inclusion

August 2015

Provisional payment bank licenses

MODERN PAYMENT
SYSTEM IN INDIA

RBI RELEASES FRAMEWORK ON

PAYMENT AND SETTLEMENT SYSTEMS
IN INDIA
Vision of RBI is to proactively promote electronic payments with an
objective towards less cash society.
The formation of National Payments Corporation (NPCI) in the year
2009 has set the stage for development of retail electronic
payments
Various innovative products, such as Immediate Payment Services
(IMPS), National Automated Clearing House (NACH) and Prepaid
Instruments (PPI), were launched after the formation of NPCI.
Huge opportunity (increased by 3%).

ROLE OF THE RBI IN

ENCOURAGING E-PAYMENTS

How Do VISA, MasterCard,

Rupay, Paytm Works?

WHAT ISRUPAY CARD?

National Payment Corporation of India
(NPCI) promoted by RBI on 26 March
2012 launched an Indian payment
gateway system as an alternate solution
to Mastercard and Visa which are widely
used across the world and have
dominance even in India.

As of nowRuPay debit card has been

issued. Processing of RuPay card is
done by the payment gateway
company CCAvenue which powers
more than 80% of eCommerce
merchants in the country.

HOW IS RUPAY CARD DIFFERENT FROM

MASTERCARD AND VISA?

Bitcoinis a form of digital currency, created and held

electronically. No one controls it. Bitcoins aren't printed, like dollars
or euros they're produced by people, and increasingly businesses,
running computers all around the world, using software that solves
mathematical problems.

What Are The Advantages

Of Paytm, Rupay Over Visa
And Mastercard?
Lower commission fee.
Lower / elimination of extra fees.
Backing from the Indian government.
Potentially faster settlement/ transactions.
There are also scheme-specific benefits.

Impact on banking sector

INDUSTRY BENEFITS
Banks can minimize
labour and supply costs
by allowing customers
to self-service.
Increased efficiency
and flexibility.
Less time consuming.
Improves easability of a
customer.

Factors that have lead the financial institutions to make use of

electronic payments are:

PROBLEMS WITH THE TRADITIONAL PAYMENT

SYSTEMS

MOBILE OPERATOR + BANKS= MOBILE BASED

BANKING & FINANCIAL
SERVICES

 Airtel (Indias largest mobile operator) & State Bank of India (SBI
Indias largest bank) A joint venture company has been set up that
envisages opening bank accounts, cashless transfers, cashless
spending & payment facilities, targeting the rural and urban poor.
Customers would be offered a no-frills banking account from SBI,
across Airtels over 1.5 million + retailer network.
Both partners have envisaged investing over INR 1 billion in this
enterprise.

 Vodafone (Indias 2nd largest mobile operator) & ICICI

Bank (Indias largest private sector bank) A similar JV
being entered offering financial products ranging from
savings accounts, prepaid instruments and credit
products through a mobile phone platform.

STRATEGIC
INITIATIVES BY GOVT.
OF INDIA

ym
a
p
f
o
t
en stem
m
t
a r n t sy
p
e
D em e
l
set t

nd
a
t
en

RESPONSIVE
REGULATION

Orienting policy with emerging developments

and innovations:
Framing new policy:
Review of existing policies / guidelines:
Setting up the Payments System Advisory Council (PSAC) of industry and
government representatives / experts to strengthen the consultative
process.

Robust infrastructure

Facilitating faster payment services

I. NEFT more frequent settlement cycles
II. Mobile banking
III.Encourage innovative mobile based payment solutions.
. Improving accessibility: Increasing acceptance infrastructure, Implementation of the
Bharat Bill Payment System and Trade Receivables Discounting System.
. Promoting interoperability: Unified payment interface.
. Enhancing safety and security: Security of ATM transactions by strengthening the
safety and security of ATM infrastructure.
. Cheque clearing systems: Encouraging complete migration of cheques to CTS-2010
standards.

Assessment of resilience of payment and

settlement infrastructure including fi nancial
market infrastructures (FMIs) and System-Wide
Important Payment Systems (SWIPS).
Design an oversight framework: On the basis of
proportionality of risk posed by PSOs.
Strengthening the reporting framework
including fraud monitoring.
Analysing data and publishing reports.

Strengthening customer grievance redressal mechanism: Require payment systems

operators to adequately train frontoffi ce staff and agents.
Enhancing customer education and awareness: (e-BAAT)
Protection of customer interest: Encourage PSOs to develop robust fraud and risk
monitoring systems.
Positive confirmation: Strengthen positive confi rmation feature of NEFT.
Conducting customer surveys