Interbank Mobile Payment Service (IMPS) Merchant Payments User Group Meeting

Current merchant payments scenario

Remote payments
E-commerce

Face-to-face payments
Fixed POS

E-commerce statistics
Growth of 47% to Rs 46,000 crores Online travel industry contributes to 76% of total e-commerce Financial services such as online insurance payments and transactions through trading accounts 6% Retailing on Internet 6% Other online services (incl online classifieds) 5% Digital downloads 2.4%

POS statistics

E-commerce usage
Barring few services such as online ticketing, Indian consumers arent shopping online. Large number of surfers use the Internet to look for information about the product or service they want to buy followed by a physical visit to a shop for buying E-payment preferred mode for electronic delivery items Cash on delivery preferred mode for physical delivery items

POS usage
Credit card volume numbers are coming down on annual basis Debit card volume numbers are going up on annual basis Number of debit cards is 12 times higher than number of credit cards On an average, 15 transactions per credit card on annual basis On an average, 1 transaction per debit card on annual basis Average transaction value for credit card transaction Rs 2,800/ Average transaction value for debit card transaction Rs 1,600/-

Electronic Payments are underutilized

Indias retail market is worth US $ 450 billion (approx Rs 22.5 lakh crores) Transaction value using credit/debit cards on POS is Rs 114,206.33 crores, thereby credit/debit card transactions at POS accounts for approx 5% of retail sales in India 5.5 lakh POS machines in India 15 million merchants in India, thereby approx 4% merchants have POS machines

Reasons for under-utilization

Investment on POS machines No of credit cards holders is approx 7% of all banking customers Pricing model serves as disincentive for merchants to encourage payments by cards. Merchants discourage use of cards for purchase of valuable goods and items Customers use credit cards more because of credit facility, debit cards is even more underutilized 7% account holders in India use net banking Customers reluctant to purchase online for security reasons

Advantages of IMPS
Number of mobile users is lot more. Mobile number can be linked to bank account for everyone Replacement of cash Remote payments via website, IVR, mobile application Fixed POS via virtual POS at retail counters Mobile POS No investment on POS machine for receiving payment via IMPS Reducing the cost of issuing banks, as less cash withdrawal at ATMs and branches Reducing cost for merchants, as efficient settlement, less risk of fraud, process efficiency Convenience, anytime, anywhere payments

IMPS merchant payments PUSH transaction

Customer can initiate transaction through mobile banking application and through SMS facility provided by bank

Transaction through SMS banking

Transaction through mobile banking

Transaction through mobile banking

Mobile top-up
Oxigen mobile number and MMID Payment reference Operator*Mobile number

Mobile POS push transaction

Pizza delivery, courier, Cabs, retail POS Customer enters the agents mobile number and MMID, amount and payment reference Agents mobile number and MMID linked with merchants account at the back-end Customer account debited and merchants account credited Customer and agent gets confirmation SMS

Use cases
Insurance DTH Fee payments Credit card payments Utility Bill payments Over-the-counter payments

IMPS merchant payments PULL transaction

Step 1 Generate OTP before transaction Step 2 Make payment using OTP

OTP validity
OTP can be generated through mobile banking application and through SMS facility provided by the Bank OTP generation is 2-factor authentication process Only one OTP is valid at a time OTP valid for only one transaction successful or failure OTP is valid for 1 hour OTP is 6-digit numeric Transaction limit unlimited (subject to bank discretion) for OTP generated through mobile application, and Rs 5,000/for OTP generated through SMS

OTP generation through mobile banking application

OTP generation through SMS

Make payment using OTP

Can make payment using OTP at merchant application
Website IVR Mobile application Mobile POS

Make payment using OTP

Mobile top-up

Customer provides OTP to the retailer Retailer prepaid balance is not debited. Oxigen account gets credited. Retailer gets commission. Incentive for retailer to promote IMPS Services can be extended to DTH, railways, bill payments, bus tickets, etc

Mobile POS pull transaction

Agent has mobile POS application on the phone Opens up form Receive payment from customer Enters payment reference, amount Asks customer to enter mobile number, MMID and OTP Agents mobile number (through which payment is initiated) is linked with merchant account Merchant account is credited and customer account is debited Customer and agent get confirmation SMS

Virtual POS
At cash counters in retail chains Customer swipes card at the cash counter Linked will billing system at cash counter Option to pay via IMPS Customer enters mobile number, MMID, and OTP Customer account is debited and retail chains account is credited

Mutual funds
Currently, in financial services, only Rs 2,000 crores worth of transactions through online methods In mutual funds, no transactions through credit cards Only debit cards and net banking methods allowed Payment through distributors also possible through distributor mobile POS method

Insurance
Agent can collect payment via agent mobile POS application. Credit directly into insurance company account No investment on POS machines for insurance company No need for agents to visit branch office to submit cash, cheques Agents promote this method because of above advantage

E-Commerce company - Cash on delivery

Cash on delivery preferred mode for physical delivery items IMPS as replacement of cash on delivery Customer places an order and opts to pay via IMPS on delivery E-commerce company ties up with courier company Courier company opens account with acquiring bank The delivery agents mobile number is linked with courier company Customer makes payment using delivery agents number Payment is received in courier company account SMS is received by customer as well as delivery agent

Merchant business
Transaction fee from merchant per transaction Deposits into merchant account with the Bank Existing current account holders to be provided the facility of receiving payments via IMPS, thereby widening merchant network No investment of POS machines for making facility available to merchants As an issuer, less cash withdrawal at ATMs and branches, therefore lesser cost of transaction Promotion on the ground through various channels Access channel (mobile) available widely Fixed and mobile POS facility, payments anytime, anywhere

Current status
Pilot launch with Union Bank of India and Kotak Mahindra Bank Union Bank of India as Issuer and Kotak Mahindra as both Issuer and Acquirer Kotak credit cards is pilot merchant for PUSH transaction Times of Money is pilot merchant for PULL transaction SBI development and testing completed, go-live in progress Oxigen is pilot merchant for PUSH and PULL transaction ICICI Bank certification in progress. Expected to go-live by middle of February Canara Bank certification after SBI go-live. Expected to go-live by middle of March Citi Bank, Axis Bank in development phase. Certification expected to start by end february, and complete by 15th April

Way forward
Let us know your interest in joining IMPS merchant payments, and provide the implementation plan Finalize the vendor Start the development Certification process 6-7 weeks One pilot merchant for PUSH and one for PULL Currently 8 pilot banks under certification Certification can be started after these 8 banks, and plan shall be shared