Building for the next billion: Democratising payments

The ubiquitous mobile phone has become the great leveller making the internet accessible to the remotest corners of the world and bringing billions online. Take India, for example, where the largest subset of this Next Billion users would originate, mobile phone penetration is expected to touch one billion by 2026. The great migration online presents a massive opportunity for fintech players to build products that will democratise payments and decisively lead us to a more inclusive, cash-less economy. 

Consider e-commerce, where cash still rules. Nearly 70 percent of commerce transactions online are cash on delivery (CoD) and it goes as high as 90 percent in rural areas clearly implying a trust deficit. Consumers don’t trust the product quality or service offered. Another reason for this high CoD is low credit card penetration. In a country with a billion-plus population, credit card penetration is less than three percent. For January 2022, the share of credit cards in retail digital payments stood at under two percent, while UPI-based digital payments were a jaw-dropping 18 percent. 

Winning the Zero-Sum game

Consumer-centric alternates including pay later and other digital payment options are replacing credit cards. Credit cards are zero-sum game for both merchants and users; Users end up paying high interest and other charges while merchants have to contend with lengthy credit cycles, processing fees, and other charges and the problem doesn’t stop here. For merchants, it’s always been an adversarial relationship with credit cards. Merchants lose transactions due to failed OTPs and tedious 2FA processes that often lead to cart abandonment, low conversion rates, dismal order volumes, and frequency.

How can you give control back to the merchants and help them establish a trust-based relationship with their customers? How can you win the zero-sum game for both merchants and consumers?

Reimagining Fintech Business Models   

Trust will be the bedrock of the reimagined business model along with product design and UX. Assuming that a significant part of the Next Billion users will have a trust deficit as well, it’s necessary to have Trust baked into the business model along with a heightened focus on trust at every stage of the product development process. 

Creating a seamless consumer experience is part of this process especially if you want to make the Next Billion comfortable moving from cash to digital payments. Remember, a large part of this consumer base will be without credit history or a ‘thin’ credit file. How do you democratise the entire digital payments landscape to include this user segment? It’s obvious that the current model (credit card-based) isn’t working, so what’s the new tech stack looking like? 

We will see the perfect trifecta of data, design, and engineering coming together to build products that are at the intersection of commerce and fintech. AI and ML will be an integral part of product roadmaps as also cobbling a much-needed robust, scalable infrastructure. What this would lead to are open networks, super apps, and unbundling discovery on platforms as we move further along. To sum it up: 3 key ingredients to entice the Next Billion: simplicity, seamless, frictionless CX.