India's demonitisation calls for rapid innovation in the payments space

• The demonetisation phase proved to be a challenge and a driver for financial institutions in India to ramp up their digital capabilities and payment services
• ICICI Bank has started integrating software robotics, artificial intelligence and data analytics to the underwriting of its unsecured loans
• Bagchi emphasised that in the financial services industry, customer experience cannot be compromised

India, a country which was mostly cash reliant, has been setting the foundation towards building a cashless society for the past years. In 2009, the government launched “Aadhaar” to provide its population with a digital identity based on fingerprints and retina scans. Next, it opened payment banks as a move to increase financial inclusion through bank accounts. It also introduced its unified payment interface (UPI) as well as India Stack – a system that enables individual to digitally sign documents, and share personal data such as addresses, bank statements, medical and employment records and tax filings. Most recently, the government announced a demonetisation in November 2016 to clean the cash-centric black market, reduce corruption and move towards a digital economy.

Since then, innovation and stronger competition emerged around financial services. The demonetisation phase proved to be a challenge and a driver for financial institutions to ramp up their digital capabilities and payment services. According to Anup Bagchi, executive and head of retail at ICICI Bank, the bulk of the movement is happening around the payments space with innovation is happening around the "Pay now" or "Pay later" functionalities.

The "Pay now" functionality is based on direct debit methods that largely focus on the customer’s convenience and experience.

Responding to the disruption in payments

As with the rest of the industry, ICICI Bank has been actively launching innovations in pay now services. “Thus, keeping this in view, we are introducing newer forms of direct payment methods in addition to debit cards. These include UPI, QR code as well as Aadhaar based payments, all of which are based on industry interoperable standards,” Bagchi highlighted.

In 2015, it introduced mVisa, a QR code-based payment technology which enables Visa cardholders to initiate payment transactions from a mobile device. The mVisa solution addresses the demands of a cardless, digital world for both consumers and merchant by combining the power of mobile connected devices with push payments as the underlying transaction methodology.

The bank also launched “Tap and Pay” for smartphone users to allow them to conduct cashless payments, and eliminate the need for cash and cards. For internet users, it rolled out “Quick Checkout” to make online shopping experience more seamless and convenient. Once a customer registers for Quick Checkout feature, subsequent customer transactions will be processed with optimum authentication details.

In conjunction with these pay now initiatives, "Pay later" is yet another interesting space where ICICI Bank is working towards introducing newer underwriting standards, thereby enhancing customer experience. “With an expanding digital footprint, it is now possible to create customer specific credit scores using data analytics, artificial intelligence and machine learning,” said Bagchi.

The bank has already started integrating software robotics, artificial intelligence (AI) and data analytics to the underwriting of its unsecured loans. “Using these, we have successfully launched personal loans in ten seconds for our customers. This instant disbursal is being offered to eligible customers as we use analytics as well as their data to pre-underwrite loans.”

Keeping customers at the centre of innovation

Bagchi emphasised that in the financial services industry customer experience cannot be compromised. Banks must keep in mind that digitisation is not happening to the banking industry alone. In building the bridge between customers and financial products and services, banks must look at the bigger picture and keep pace with the transformation happening outside of the financial service silo.

“Customers are at the epicenter of all our innovations. Like any other industries, customers in the Indian banking industry want seamless services. With an increase in mobile and internet penetration across the country, we are now able to cater to our customers in a manner that was not possible earlier. Customers, too, want to get serviced in newer ways which in turn encourages banks to bring innovations.”