<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/07/Creatives-for-Debit-Cards-blog_1M-1.webp" alt="M2P Fintech" title="" width="100%" height="284">Debit cards are a very critical part of the payment ecosystem. As of January 2022, there were over 940 million active debit cards in India. Averaging a transaction value of 3.5 trillion Indian Rupees per month, the volume is much higher than that of credit cards.Highly secure, debit cards are super easy and convenient to use. All you need to do is enter the PIN (Personal Identification Number) or tap the debit card for quick cashless transactions. As the debit cards are linked to bank accounts, they use existing account balances, so there is no question of falling into debt or paying interest charges. In fact, you can also keep track of spending and maintain a record of all your expenditures.<h2 class="heading-node" id="b7bd">What are debit cards?</h2>Debit cards are payment cards that are linked to bank accounts. They are issued by banks and NBFCs to individuals and corporate entities. And can be used for in-store and online payments, fund transfers, and cash withdrawals. The amount required for transactions must be in the cardholder’s bank account at the time of the transaction and will be transferred directly from that account to the recipient’s account in real-time.Here are the key components of a debit card.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/07/Creatives-for-Debit-Cards-blog_3M.webp" alt="M2P Fintech" title="" id="5csx15muw" width="100%" height="284"><h2 class="heading-node" id="da17">Types of debit cards</h2>Banks and NBFCs issue different types of debit cards. They are classified based on payment platform, technology, and usage.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/07/Creatives-for-Debit-Cards-blog_2M.webp" alt="M2P Fintech" title="" id="tae1ugzin" width="100%" height="284"><h3 class="heading-node" id="9d76">Payment platform</h3>·&nbsp;Visa Debit Card-Debit cards that use the VISA card network·&nbsp;MasterCard Debit Card-Debit cards that use MasterCard network·&nbsp;RuPay Debit Card-Debit cards that use the RuPay network established by the NPCI (National Payments Corporation of India)<h3 class="heading-node" id="4bba">Technology</h3>·&nbsp;Contactless Debit Card&nbsp;-Debit cards that are encrypted with Radio Frequency Identification (RFID) or&nbsp;<a class="link au mn" href="https://m2pfintech.com/blog/nfc-payments-simplifying-payment-space/" rel="noopener">Near-field communication (NFC)</a>&nbsp;technology are contactless debit cards. There is no need to hand over the card at the POS terminal physically. Just a wave or tap will do.·&nbsp;Chip &amp; Pin Debit Card- Debit cards inbuilt with a chip that helps store and transact data in an encrypted format are called Chip &amp; Pin debit cards. Transactions happen here with the help of a PIN (Personal Identification Number).·&nbsp;Magnetic Stripe Debit Card- Debit cards that come with a magnetic band that is swiped past its reading head while a transaction takes place is a magnetic stripe card.<h3 class="heading-node" id="7b59">Usage</h3>·&nbsp;Prepaid Debit Card-&nbsp;Prepaid debit card is pre-equipped with a fixed amount of money to spend and can be reloaded if required.·&nbsp;Virtual Debit Card-&nbsp;This is a digital debit card that helps pay for online purchases. They can be used through mobile banking applications.·&nbsp;Disposable Debit Card- This is a virtual debit card that can be created instantly. They are most suited for one-time online transactions.·&nbsp;International Debit Card-&nbsp;This debit card is used to make payments and cash withdrawals overseas.·&nbsp;Business Debit Card- Corporate entities can provide debit cards to their employees to make business purchases and cash withdrawals.<h2 class="heading-node" id="f613">RBI directive on debit cards</h2>Effective 1 July 2022, RBI brought in the following regulations for debit card issuance. Banks and NBFCs must strictly adhere to the directives.· Non-banking financial companies (NBFCs) can issue debit cards virtually or physically after obtaining approval from the RBI.· Banks shall only issue debit cards to customers holding savings/current accounts. Issuance of debit cards to cash credit/loan account holders is prohibited.· Banks shall not force customers to avail the debit cards. However, if a customer does not want a debit card, they cannot be denied other services from the bank.· Banks should develop a comprehensive debit card issuance policy and get approval from their boards and RBI. Subsequently, banks must roll out debit cards per this policy.· Banks must provide options for disabling/blocking the form factor via internet/mobile banking, IVR, SMS, and/or other modes.· In place of plastic debit cards, Scheduled Commercial Banks can issue other form factors after obtaining explicit consent from the customer.In addition to the above regulations, RBI stated, “It will not preclude the banks from linking the overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana accounts with a debit card.”<h2 class="heading-node" id="1f7e">Why banks and NBFCs issue debit cards?</h2>Issuing debit cards provides several benefits to banks and NBFCs. Key advantages are listed below.· Improve customer retention and engagement· Increase review through— Higher cross-selling opportunities— Contextual conversion of transactions into pay later loans· Removes NPA issues, as no interest or repayment charges are levied· Promotes digital transactions and&nbsp;<a class="link au mn" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/" target="_blank" rel="noopener ugc nofollow">financial inclusion</a>· Holds a moral compass on enabling accountability, budgeting, and spending within means<h2 class="heading-node" id="8bec">Issues in legacy card issuance platforms</h2>Gone are the days when banks issued debit cards using legacy infrastructure platforms. While the issuer’s focus is on catering to the needs of a versatile demographic with quick and customized card programs, legacy platforms are a huge hurdle. The legacy systems limit the agility and flexibility required to scale up multiple use cases, customize personalized card experiences, and quick go-to-market speed.It takes several months or even a year to set up a card program, which causes a lag in launching the product. Thus, businesses suffer from increased cost and effort and grapple with the ability to offer consumers the best digital card experience.<h2 class="heading-node" id="6462">Modern APIs to simplify debit card issuance</h2>An&nbsp;<a class="link au mn" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/" target="_blank" rel="noopener ugc nofollow">API</a>-first card issuing platform helps issuers develop unique debit card solutions customized to consumer expectations and business needs. The platform is hosted on a cloud infrastructure that accommodates scaling, as the Application Programming Interfaces (APIs) are amenable to changes in business logic and new use cases.<h2 class="heading-node" id="97ab">Boost GTM with our debit card ecosystem</h2>Using our API-based card platforms, issuers can go to market(GTM) with a full-fledged debit card program within weeks. We provide a holistic debit card ecosystem that encompasses everything right from applying for&nbsp;<a class="link au mn" href="https://m2pfintech.com/blog/the-bin-migrationpreparing-for-8-digit-bins/" target="_blank" rel="noopener ugc nofollow">BIN</a>, card issuer processing, identifying a card printer and fulfillment supplier, mobile wallet&nbsp;<a class="link au mn" href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/" target="_blank" rel="noopener ugc nofollow">tokenization</a>, and a payment scheme contract. We also possess our own card switch on the issuer side (for routing transactions) and&nbsp;<a class="link au mn" href="https://m2pfintech.com/blog/why-is-risk-based-authentication-rba-critical-for-banks/" target="_blank" rel="noopener ugc nofollow">ACS</a>&nbsp;system (authentication gateway), which are features most other API providers do not have.Issuers can build a unique customer experience using custom controls, unique data-based transaction authorization, and issue virtual and disposable cards. APIs also help drive actionable, real-time transaction data to drive insights and program improvements.We power comprehensive program management that cuts across core issuing, processing, technology with mobile-first API-based infrastructure, and back office operations that include recon and chargeback processing. We also provide support for marketing and customer service via a chatbot interface. All these programs are quite flexible, so issuers may opt-in based on their level of readiness and level of complexity in card processing, technology, operation, risk management, and customer service.Want to know more about debit card issuance?Write to us at&nbsp;<a class="link au mn" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Debit Card Issuance 101 - All You Need To Know

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/07/6-Reasons-Cards-Issuers-Need-Modern-API-based-Issuance_Word-press.webp" alt="M2P Fintech" title="" id="rccc3brjk" width="100%" height="356">Payment cards are a necessity today. The benefits they deliver are immense not just to consumers. But also to issuers such as banks, NBFCs, and businesses.To businesses and financial institutions, cards are deal-breakers. Accessible in physical and virtual form factors, they hold the power to drive customer loyalty, enhance experiences, control business spending, and generate revenue. That’s why despite competition from other digital payment modes, card transactions are projected to grow at 12.9% reaching $39.7 trillion by 2025.<h2 class="heading-node" id="69f0">Shortcomings of Legacy Card Issuance Platforms</h2>Conventionally cards were designed and issued using legacy platforms. Though it simplified card issuance to a certain extent, the rigid&nbsp;<a class="link au lo" href="https://m2pfintech.com/blog/the-world-of-apis-how-they-power-fintech/" rel="noopener">APIs&nbsp;</a>had limited scope for innovation, speed, and multiple use-case support. Configuration flexibility, customizations, and security compliance also took a hit. This resulted in slow go-to-market speed, complex configurations, compliance,&nbsp;<a class="link au lo" href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/" rel="noopener">tokenization&nbsp;</a>issues, and fragmented reporting. In short, legacy infrastructure left no potential to cater to modern customers with evolving needs and priorities.<h2 class="heading-node" id="4109">Why API-based Card Issuance is the Way to Go</h2>In an era where speed of card issuance, ease of onboarding, personalization, security, and tangible reward redemption are key differentiators, modern card issuance is the need of the hour. Right from launching a card program, to managing the program lifecycle, meeting regulatory compliance, to scaling the card program, modern&nbsp;<a class="link au lo" href="https://m2pfintech.com/blog/why-should-apis-be-your-holy-grail-for-prepaid-card-issuance/" rel="noopener">API-based card issuance</a>&nbsp;is the way to go.Card issuers worldwide are choosing modern card issuance over legacy for the following reasons.<h2 class="heading-node" id="l929s1bfo">1. Versatile Personalization</h2>A recent McKinsey report suggests that businesses can achieve a 15% revenue growth through personalization. Modern card platforms have flexible APIs that are amenable to innovation and customization, making them best suited to cater to modern consumer needs. The card can be customized for integration into a digital wallet for payments across in-store and online POS, and ATMs with varied limit management options for cardholders.The versatility of modern cards is so enormous that they can support multiple use cases on the go. They can double as general-purpose prepaid cards, single-use, and multi-purpose travel cards, gift cards, subscription cards, loyalty cards, and transit cards, among many others.<h2 class="heading-node" id="a0c8">2. Agile Wallet Integrations and Tokenization</h2>Cards can offer the advantage of physical as well as virtual form factors to issuers and customers. Though physical cards may take time to be shipped, virtual cards can be activated and used instantly, thus establishing consumer engagement right from day one.Modern card issuance platforms enable you to scale up and integrate virtual cards and physical cards into digital wallets. They lower development efforts by replacing numeric codes with natural language labels and creating actionable data. They also facilitate encrypted and tokenized virtual card data that can ease the integration of cards.<h2 class="heading-node" id="eebd">3. Access to PCI Widgets</h2>The PCI Security Standards Council provides a Payment Card Industry Data Security Standard (<a class="link au lo" href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/" rel="noopener">PCI DSS</a>) framework to protect card transactions and card holders’ data from breaches. PCI DSS certification is mandatory for fintechs or any company accepting card payments, storing, and displaying consumer card data on their website &amp; apps. The compliance process is cumbersome and time-consuming for issuers and merchants who want to manage card payments.Modern card issuance platforms provide access to PCI widgets that enable instant PIN activation and access to mobile apps without the hassle of going through a lengthy compliance process. This enables issuers to focus on their core business and customer experiences while leaving issuance, compliance, data security, privacy, and program management to certified modern issuance platforms.<h2 class="heading-node" id="a2f0">4. Dynamic Authorization</h2>In legacy infrastructure, spend controls are mostly preset and are not dynamically validated against live data and changing business rules. But modern card issuance opens up the payment flow and authorizes card transactions against live criteria such as card-present and Card Not Present (CNP) scenarios, spend amount, time, date, and frequency of transactions. It also customizes card spending authorization based on customer risk profile, merchant listing, currencies, and geolocation.<h2 class="heading-node" id="1c5d">5. Profitability</h2>Building a card program from scratch requires resources in terms of capital and time. Even though card issuers identify a problem they wish to address, the time and cost required to test the hypothesis are not feasible or profitable.Modern card issuance enables issuers to run and manage card programs while reducing cost of ownership and accelerating profitability through increased customer acquisition, retention, and satisfaction. The card program managers do not have to do the heavy lifting in obtaining the regulatory and compliance standards. With the help of modern card issuance, they can earn revenue through interchange charges and Merchant Discount Rate (MDR) by addressing the identified segment from the start. The margins can be shared between card issuers, card program managers, card networks, and processors.<h2 class="heading-node" id="c606">6. Global Scale-ups</h2>Modern card infrastructure can help scale up businesses for global payments and expansion. Leveraging their region-agnostic cloud infrastructure and scalable resources, issuers can automatically scale as and when traffic and transaction volume grows, without any manual intervention.Card issuers get the option to expand and test new business models and card use cases while launching card programs with the help of API-based card issuance stacks. This saves time spent on launching a new program by integrating with existing infrastructure and databases seamlessly. Equipped with backups and disaster recovery, these systems can be compatible with multi-currency payments, thus making them an ideal choice for expense management and travel payments management.Now remember, the six reasons delved upon above are just the beginning.Want to know more about how modern card issuance can benefit your business?Write to us at&nbsp;<a class="link au lo" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech bytes curated for curious minds like you.

6 Reasons Cards Issuers Need Modern API-based Platform

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/MicrosoftTeams-image-109.webp" alt="M2P Fintech" title="" width="100%" height="317">Wallet limit breaches and data duplications are crucial problems for <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid card</a> issuers. They hold the risk of consumers overriding the loading and spending limit.That’s why <a class="link" href="https://m2pfintech.com/blog/rbis-new-guidelines-for-ppis-how-will-it-impact-the-fintech-industry/">RBI</a> mandated that all prepaid programs deploy a centralized System of Records (SOR) in&nbsp;October’17. All prepaid program partners must mandatorily connect to the issuer’s SOR system.<h2 class="heading-node" id="7x11l5ome" style="text-align: justify">What is a System of Record?</h2>A System Of Record (SOR) or Source System of Record (SSoR) is a single source of truth or data source that stores important information about a system or process within the organization. It serves as a shared reference point that protects prepaid card issuers against data repetitions that arise when individual data is created, handled, and processed by multiple individuals or business units. As a result, SOR provides a single source of truth for operations.The System of Records monitors the consolidated prepaid balance of all wallets issued to the end customer by the same issuer, independent of the prepaid program partner. It is a central ledger that tracks every registered customer’s overall balance in real-time based on their <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> status. In addition to holding centralized data on the consolidated balance of a customer’s prepaid wallet, it also carries issuer-specific information. This is in cases where the balance of multiple partner wallets is integrated under a single <a class="link" href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">PPI</a> issuer.<h2 class="heading-node" id="20csbnfpl" style="text-align: justify">How SOR works for prepaid cards?</h2>Say an individual holds two prepaid wallets with the same issuer. His personal information is captured in the issuer database for profile creation and <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">KYC verification</a>. &nbsp;Issuers who partner with Token Service Providers for SOR will have all data automatically transferred to a centralized database. &nbsp;Then KYC-based wallet limit, dedupe check, and customer profile creation will need to be managed.<h2 class="heading-node" id="7g22xdrk5" style="text-align: justify">Why SOR is critical?</h2>SOR is critical for prepaid issuers who deal with huge volumes of data from multiple source systems. This system of truth helps secure the integrity and validity of any data set as it remains the only source of truth. If there is any other agreed system of record, the data element must be either linked to or extracted from it. In other situations, the provenance and estimated data quality should be documented.&nbsp;Here are some key benefits SOR offers to users.<ul class="list-node" id="niw8n6t1l"><li>Provides the most complete, accurate, and timely data</li><li>Best structural conformance to the data model</li><li>Nearest to the point of operational entry</li><li>Can be used to feed other systems</li></ul><h2 class="heading-node" id="vwxcavknq" style="text-align: justify">How can M2P facilitate SOR implementation?</h2>We help banks and prepaid card issuers build a SOR, which will serve as a final source of truth for all customer data. Our robust <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-led infrastructure offers a centralized database to track and monitor the data in real-time.&nbsp; The built-in checks and balances comprise AML, negative listing, and real-time watch listing capabilities to ensure compliance and zero limit breaches across programs.Looking to implement SOR for prepaid cards?We would like to help. Write to us at business@m2pfintech.com.&nbsp;&nbsp;<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Why System Of Records (SOR) is Critical for Prepaid Card Issuers?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_Wearable-in-Banking-payment.webp" alt="M2P Fintech" title="" width="100%" height="383">The global wearable market size is projected to reach USD 931.31 Billion by the end of 2030, and wearables are here to stay.Not just in healthcare, retail, and telecom, but also in banking and payments. Changing customer priorities and fintech advancements accelerated the market for wearables in the pandemic era. With millennials, gen X, and gen Z consumers wanting secure, convenient, instantaneous transactions, contactless wearables are the way to go.Projected to grow at a CAGR of 11.5%, the future of wearables is likely to evolve further as consumers and financial institutions transition into the cashless, digital universe. Some wearable payment devices have the potential to become a “one-stop-shop” for several services.Disney’s Magic Band for instance is a wearable that Disney Land provides its visitors. Designed in the form of a funky wristband, the magic band functions as an access key, a payment device, and a personalized tracker. And it is also compatible with diverse smartphones and technologies.<h2 class="heading-node" id="7ff3" style="text-align: justify">What are wearable payment devices?</h2>Wearable payment devices are apparel, gadgets, and accessories we use to make contactless payments. The most common types are smartwatches, belts, jackets, fitness trackers, and even rings. They use services like Apple Pay, Samsung Pay, and Google Pay to connect the device with the consumer’s bank account.<h2 class="heading-node" id="0774" style="text-align: justify">Top wearable payment devices in the market</h2><h4 class="heading-node" id="peflro9so" style="text-align: justify">Apple Watch</h4>The Apple Watch is one of the most popular smartwatches on the market, and it features NFC (Near Field Communication) technology. This technology allows the watch to communicate with other NFC-enabled devices, such as smartphones, to exchange data, make mobile payments, and do other contactless transactions.<h4 class="heading-node" id="zefu7xngv" style="text-align: justify">Samsung Galaxy Watch 6 Classic</h4>Samsung Galaxy Watch 6 Classic offers contactless payment services through Samsung Wallet. This smartwatch enables users to make contactless payments at stores that accept NFC-enabled transactions.<h4 class="heading-node" id="7zin33oqj" style="text-align: justify">7 Ring</h4><a class="link" href="https://seven.ooo/">7 Ring</a> is India's most advanced form of making contactless payments, utilizing Near-Field Communication (NFC) technology. Co-certified by EMV, 7 Ring has the same security standards as the payment instruments used worldwide by leading banking networks.7 Ring uses <a class="link" href="https://www.livquik.com/">LivQuik</a>&nbsp;(powered by M2P)&nbsp;as their wallet provider, which works seamlessly with a tap at the PoS terminal, enabling convenient payments without the need for a phone or Bluetooth connection.<h4 class="heading-node" id="vknjub99i" style="text-align: justify">Ringly</h4>Ringly offers rings and bracelets that connects to your phone via Bluetooth. Partnering with MasterCard, they allow you to make contactless payments apart from tracking your activities. They allow you to make contactless payments with just a wave of your hand.Now we’ve seen only a sample of wearable devices. Belts, jackets, and even shoes are used as wearable payment devices today.<h2 class="heading-node" id="f558" style="text-align: justify">How do wearable payment devices work?</h2>To use a wearable payment device, say a smartwatch, the user needs to link the device to a credit card or bank account. Once the device is linked, the user can make payments by simply tapping the device against a payment terminal. The payment is then processed through the credit card or bank account that is linked to the device.<h2 class="heading-node" id="cb0d" style="text-align: justify">Wearable payment technologies</h2>Wearable payment systems are quite commonly used in e-banking and payment platforms. They operate on technologies such as HCE, Barcode, Contactless Point of Sale, Radio Frequency Identification (RFID), and Near-field Communication (NFC) to enable payments and cash transfers.<h4 class="heading-node" id="8264" style="text-align: justify">Host Card Emulation (HCE)</h4>Host Card Emulation (HCE) enables payments that are activated by NFC technology. ​​It allows a device to emulate the functionality of a smart card to provide contactless payment capabilities using the ISO/IEC 7816–4 APDU command set. It communicates with a reader and stores data in the same way that a smart card would. A key benefit of using HCE is that it does not require a physical smart card or a built-in NFC reader. And it can be used for loyalty programs and access control too.<h4 class="heading-node" id="387a" style="text-align: justify">Barcodes</h4>Some wearables are encoded with scan-and-go application barcode scanners for payments. It allows the customer to check out quickly without conventional processes. Barcode technology offers several advantages in wearable devices. They are secure, can be read quickly and easily, and can store a large amount of data. Newer barcode standards, such as QR codes can be deeply encrypted to prevent unauthorized access.<h4 class="heading-node" id="aae0" style="text-align: justify">Contactless Point of Sale (CPOS)</h4>The contactless point of sale (CPOS) is a new technology that uses Radio Frequency Identification (RFID) technology to communicate with the POS terminal and make payments. The CPOS system is fast, convenient, and secure. You just hold your card near the POS terminal, and the payment will be processed automatically. It uses the latest encryption technology to protect personal information.<h4 class="heading-node" id="e897" style="text-align: justify">Radio Frequency Identification (RFID)</h4>RFID wearables such as rings, wristbands, and dongles comprise an embedded chip with an RFID tag. The tag is a unique identifier that an RFID reader can read. The reader can track the tag’s location or access wearer information. RFID-enabled wearables offer many advantages over traditional ID payment devices. They are more difficult to lose or misplace and can be read from a distance, making them ideal for tracking assets or people.<h4 class="heading-node" id="4a4c" style="text-align: justify">Near-field Communication (NFC)</h4>NFC ​​ is a short-range wireless technology that enables two devices to communicate when they are near each other, typically no more than a few centimeters. It is a convenient way to share small amounts of data between devices and works great in wearable payment devices, such as smartwatches, fitness trackers, and clothing.<h2 class="heading-node" id="4re67ozcs" style="text-align: justify">Wearables, IoT, and Fintech</h2>As with many things to do with digital transformation, the pandemic pushed businesses to explore and invest in Point-of-Sale (POS) technology, making wearables more than just useful tools. Readily available and user-friendly in usage and navigation, payment apps such as Google Pay and Apple Wallets, have made it easy for all demographics to transition smoothly into wearable technology.In the current mobile climate, using the Internet of Things (IoT) in banking is the way to attract new customers and retain existing ones. Wearable payment devices and IoT helps the financial sector to gain deep customer insight and improve user experience. Banks implementing IoT have seen benefits in cost savings, higher efficiency in business processes, and better customer experience. They have also been able to build new revenue models.There is no doubt that fintech needs wearables, as it opens up new opportunities to transform their businesses and remain strong contenders in the market. We see the increasing use of wearables and in a way, they may even replace mobile phones in the future.<h2 class="heading-node" id="51ef" style="text-align: justify">How wearables benefit banks and fintechs</h2><h4 class="heading-node" id="2062" style="text-align: justify">Access to data</h4>Wearables provide banks access to voluminous data as they are worn by customers most of the time. Customer intelligence gained can be used to enhance experiences and personalize products and services. Wearables are critical to data extraction and analytics.<h4 class="heading-node" id="f3b5" style="text-align: justify">Personalization of customer service</h4>Financial institutions and fintechs today recognize the need to be customer centric. And data extracted from wearables have proven to personalize and optimize customer interactions. Wearables can help predict customer behavior through real-time data and target them with recommendations and personalized offers.<h4 class="heading-node" id="135f" style="text-align: justify">Omnichannel user experience</h4>A combination of IoT and wearables can make all the difference in omnichannel customer experience. Fintech and banks can gain a competitive edge with wearables, for example, using smartwatches to make ATM withdrawals and biometric-enabled transactions.<h4 class="heading-node" id="072a" style="text-align: justify">Risk assessment</h4>Banks and fintechs need to mitigate risk by assessing potential factors. Analyzing customer data extracted from wearables can help enhance risk management decisions on lending, or insurance, among many others.<h2 class="heading-node" id="661d" style="text-align: justify">Banking Wearables in India</h2>India is fast catching up in the wearables market, especially after RBI increased the limit for contactless transactions to Rs. 5000. Both SBI and Axis Bank have launched their wearables Titan Pay and Wear n’ Pay, respectively.<h4 class="heading-node" id="92aa" style="text-align: justify">Titan Pay</h4>Titan Pay is a wearable collaboration between Titan and SBI that offers watches to enable contactless payments. It comprises a mobile app that allows users to send and receive money instantly. Using the watch and the app, users can transact in multiple currencies, track spending, and even set up a budget.<h4 class="heading-node" id="8fae" style="text-align: justify">Wear n’ Pay</h4>Wear n’ Pay devices include accessories like key chains and watch loops from AXIS Bank. It allows you to pay for purchases by just swiping your wrist. The system uses a special wristband that you can wear while you shop. You simply swipe your wristband across the payment terminal to pay for your purchase.<h4 class="heading-node" id="94vghp82w" style="text-align: justify">Indus PayWear</h4>By enabling consumers to easily tokenize their IndusInd Bank credit or debit card onto a chip-enabled wearable device, Indus PayWear is poised to completely change the payment experience. This will do away with the requirement for a physical card or even a payment app for purchases and enable quick and safe tap-and-pay transactions at any contactless Point-of-Sale (PoS) terminal worldwide.<h2 class="heading-node" id="9h5ne3vh6" style="text-align: justify">Real-time adoption of Wearables</h2>During the 2024 IPL, the <a class="link" href="https://www.npci.org.in/PDF/npci/press-releases/2024/NPCI-Press-Release-RuPay-Launches-Exclusive-On-The-Go-Contactless-Payment-Collectible-for-2024-TATA-IPL-Playoffs-and-Final.pdf">NPCI launched an NFC-enabled wristband</a> for payments and access to the playoffs and finals. As a part of the “RuPay On-the-Go” series, the wristband provides seamless access management during events and functions as a versatile contactless payment device post-event.This first-of-its-kind initiative links access management for live events and payments into one exclusive collectible for select attendees of the playoffs and finals.<h2 class="heading-node" id="6f11" style="text-align: justify">Conclusion</h2>The integration of wearable &amp; contactless payments is an emerging trend in the modern payment system. While <a class="link" href="https://m2pfintech.com/blog/the-rise-of-digital-payments/" target="">digital payment</a> trends keep on changing, the need to provide the best consumer experience across the platform is always constant for Financial Institutions and Payment Service providers.At M2P, we provide the best customizable payment experiences for businesses. Using our end-to-end API stack, we ensure that modern innovations and technology are seamlessly integrated into your ecosystem. Our APIs enable channel management and limit management across PoS, contactless payments, ecommerce, and withdrawals on your payments platform.Want to know more about integrating contactless payments and other customizable features on your payments platform?Write to us at&nbsp;<a class="link au lo" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Rise of Wearables in Payments and Banking

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Remittance-with-UPI-_Blog-Banner-.webp" alt="M2P Fintech" title="" width="100%" height="284">India has the world’s largest diaspora. More than 30 million Indians reside outside the country. The Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) from the US, UK, and the Middle East make India the world’s largest recipient of remittances. Despite the pandemic and its economic impact, India received $87 billion* remittance in 2021. (Source: World Bank 2021 report)The MENA region is home to a significant expatriate population. And more than half of its outbound remittances are sent to India. India-UAE is the world’s second-largest remittance corridor clocking more than $20 billion in transaction value. It makes up 33% of India’s total inward remittance volume. According to the Central Bank of the UAE’s (CBUAE) report, the outward remittances of the UAE increased by 9.2% in the third quarter of 2021. India retained its position as the top recipient by accounting for 26% of the outward remittance.<h2 class="heading-node" id="3sb73vqzx">India and the Middle&nbsp;East</h2>Now, remittances from the Middle East are not a recent phenomenon in India. They go way back to the 1900s when Indians moved to the Persian Gulf, searching for better opportunities. Since then, India’s trade relationship with the UAE and the rest of the countries in the Middle East has flourished. Today, over 7.6 million Indians live in the Middle East.During 2021–2022, India chalked up a total trade of $154 billion with countries in the Gulf Cooperation Council (GCC), accounting for 18.3% of its collective imports and exports value. The bilateral trade between India and the UAE is valued at $72.9 billion. The UAE, Saudi Arabia, and Iraq are India’s third, fourth, and fifth-biggest trading partners, and the trade sector is expected to expand over the upcoming years.The recent Comprehensive Economic Partnership Agreement (CEPA) is a significant milestone for bilateral trade relations between India and the UAE. Effective from 1 May 2022, CEPA offers an open and equitable ecosystem for businesses and accentuates new frontiers in cross-border payments and remittances.<h2 class="heading-node" id="fwofl48gd">Tale of Money Transfer to&nbsp;India</h2>In the early eighties and nineties, expats physically visited money transfer operators and agents to send money to their families back home, while businesses and Governmental agencies depended on conventional modes of <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payments</a>. However, these traditional methods were fraught with challenges such as security, time delay, high costs, and currency conversion fees.For example, Demand Draft (D/D) was one of the earliest forms of remittance. D/D is traceable at any given time and hence, was considered the safest and niftiest money transfer method. However, it was an exceptionally tedious and time-consuming process. But slowly, things changed. Remittances started to evolve, from drafts to personal cheques and wire transfers to the online and mobile transfers of today.<h2 class="heading-node" id="ko5i3w91c">Key Challenges in Remittances</h2>Differences in the time zones, currency conversion, multiple compliance checks, unforeseen delays, charges, and the uncertainty of receipt of payment were challenges that payers and payees faced in international remittance. As customer preferences and technologies evolved, cost, compliance, speed, and interoperability emerged as factors that affected convenience, security, and seamlessness.CostThe charges associated with the remittances vary across markets and services providers. Key factors include the transaction amount, transfer destination, payment channel, and exchange rates. In addition, the cost of a service provider is subject to the complexity involved in managing settlements in multiple currencies and the time and effort required to maintain compliance with the <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a>/AMC guidelines and partnerships. This calls for innovative technologies and digitization to minimize the cost, in turn reducing the overall transaction cost for the customers.Compliance and SpeedThe most common reasons for the delay in remittances are the fragmented remittance information coupled with the extensive checks for anti-money laundering and fraud activities. Financial institutions ought to carry out an overarching list of compliance checks to mitigate risks. A central hub to share cross-national information can aid in speeding the payment process.Interoperability<a class="link" href="https://m2pfintech.com/blog/why-payments-interoperability-is-a-must-for-todays-generation/">Interoperability</a> plays a crucial role in improving the speed and time of remittances. Cross-border payments are time-intensive — lesser the compatibility between the systems, the higher the transaction risks. A standardized global messaging format reduces the time, effort, and error that arises with the translation.<h2 class="heading-node" id="xfzjj9vvg">UPI — Resolving the Challenges in Inward Remittance</h2>The introduction of <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> has changed the course of remittances. This ground-breaking financial innovation has the potential to help the payer and payee overcome remittance challenges and has made international transfers quick, simple, cost-efficient, and transparent. Money transfer institutions are tapping the potential of fintechs to develop a UPI-based cross-border payment ecosystem that leverages global networks to make overseas transfers more reliable and secure.As one of the largest markets for inward remittances, India is adopting UPI as a fundamental mode of remittance through its strategic collaboration with several nations. National Payments Corporation of India (NPCI) set up a payments wing (NIPL) to internationalize UPI and Rupay, and enable real-time bank account payouts.NIPL has inked agreements with several countries in the Middle East and the Asia Pacific, including United Arab Emirates, Nepal, Bhutan, Singapore, and Japan, to deploy the UPI payment rails in their jurisdictions. In the last two years, companies like LuLu Financial and Al Ansari Exchange have benefitted from real-time UPI–based remittances.<h2 class="heading-node" id="gfll6t4lh">Benefits of Integrating UPI and Remittance</h2>Mobile-first InteroperabilityUPI offers a mobile-first, interoperable open payment infrastructure. This allows Payment Service Providers (PSPs) operating on diverse payment systems to undertake, clear, and settle payment transactions through a common interface with common identifier/security standards. This minimizes the challenges of integration and interoperability.Anywhere Anytime AvailabilityUsually, cross-border payments are restricted to banking hours/days. But UPI is a 24x7, 365 days service. With UPI, remittances can be done at any time via more than one digital channel from anywhere without worrying about the banking hours, bank/public holidays, or even bank strike.Real-time TransactionsUPI is a real-time payment system that instantly completes and settles the transactions. It eliminates the need for registering the payee and the waiting time to activate the payee as a beneficiary. The interface allows the users to transfer money by simply keying in the virtual address or UPI ID to make the requisite payment. This will drastically reduce the transaction time and associated risks.Curtails ErrorA lot of things can go wrong when customers transfer money by entering the details of the beneficiary’s bank account. For example, they can provide an incorrect account number or a wrong IFSC code leading to a transaction failure. UPI remittance can curtail such errors as the customer can disregard the bank account details and remember only the Virtual Payment Address (VPA) or the UPI ID to complete a transaction successfully.Prevents FraudUPI uses proxy identifiers like a mobile number and a user-specific Unique Identifier (UPI ID or VPA) to make payments. This is the main advantage of UPI as it addresses security and privacy concerns. Additionally, the UPI ecosystem has single-click two factor authentication to protect users from financial fraud during digital transactions.Reduces Waiting Time and FrictionAs established earlier, the remittance process entails filling up the beneficiary’s bank account details and waiting several hours to transfer the funds to their friends/family. In the meantime, the senders and receivers are both left in the dark over the state of a transfer. Implementing UPI in remittance systems helps address such frictions as it enables instant transactions and lets the customers know the status of the money transfer.Increases Cost-EfficiencyBanks charge a competitive fee for each international transaction. Since the interface has the potential to simplify the correspondence between global banks, it would reduce the time and effort involved in each transaction. This allows banks to lower the transaction fee.UPI’s real-time, round-the-clock, and simple interface radically enhances the cross-border remittance experience as customers benefit from superior efficiency, speed, accessibility, and transparency.<h2 class="heading-node" id="gzqqd1ipr">M2P — UAE’s first UPI-enabled Remittance Service Provider</h2>As UAE’s first UPI-enabled remittance service provider, we enable banks and foreign exchange operators to facilitate end-to-end settlements inclusive of conversion facility. Our deep domain expertise, innovation, and technology know-how render a hassle-free/frictionless remittance experience for both the payer and payee.Most importantly, our intermediary banks are certified by NPCI, and we are compliant with the remittance directives issued by the Reserve Bank of India (RBI). Our full-fledged, mobile-first, customizable API stack simplifies UPI transactions and enables real-time international transfer.To know more about using UPIs for cross-border remittances, write to us at business@m2pfintech.com.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Remittance with UPI - A Giant Leap for Cross-Border Payments

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_02_WordPress-1.webp" alt="M2P Fintech" title="" width="100%" height="661">Imagine you own a digital wallet. Its primary function is to let you spend viz., shop with partner merchants, make payments, and transfer money to other wallets and bank accounts. Then the same wallet offers a card (any authorized card network Visa, MasterCard, RuPay) to facilitate card-based in-store and online payments. Further, the wallet also comes with a UPI virtual ID to allow payments via QR codes and <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a>.This is payments interoperability making life easy for you.<h2 class="heading-node" id="abd3">What is Payments Interoperability?</h2>Now, there are several definitions for interoperability. But at its core, it is the basic ability of multiple digital systems, applications, and databases to connect and communicate with each other.Payment platforms leverage financial technology to connect and share data among ecosystem partners, viz., banks, payment gateways, payment processors, merchants, and consumers. This integration helps carry out transactions between payment service providers, third-party processors, and other networks without hassles. The interoperability occurs at the origination point, at the network level, or through an intermediary, both in national and international payment systems.Here are a few common attributes of interoperability.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Interoperability_BlogBanner_02_wordpress.webp" alt="M2P Fintech" title="" id="7ruk1ov0f" width="100%" height="661">Payment system interoperability can be at domestic (national) and international levels.<h2 class="heading-node" id="558a">National Payments Interoperability</h2>National payment interoperability is limited to payment systems within a single country. National interoperability usually involves the same type of accounts. It happens between:<ul class="list-node" id="sk8vndtl8"><li>Deposit accounts issued by various banks</li><li>e-money transaction accounts offered by mobile network operators</li></ul>National interoperability is ensured through bilateral agreements between Payment Service Providers (PSP) and Payment Systems Infrastructures (PSIs). Or through a centralized interoperability solution, with standardized regulatory measures stipulated by the central bank.<h2 class="heading-node" id="2998">RBI’s Mandate for Domestic PPI Interoperability</h2>Governments and Central Banks are giving interoperability a significant push to accelerate cashless ecosystems. <a class="link" href="https://m2pfintech.com/blog/rbis-new-guidelines-for-ppis-how-will-it-impact-the-fintech-industry/">RBI</a> aims to make interoperability mandatory for all full-<a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> <a class="link" href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">Prepaid Payment Instruments (PPIs</a>) and acceptance infrastructure by 31 June 2022. The move is to drive inclusion in <a class="link" href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">cashless payments</a>, and optimally utilize payment instruments like cards and wallets, given the constraint of scarce acceptance infrastructures like point-of-sale (POS) devices, ATMs, QR codes, and bill-payment touch points. Any user who signs up for a wallet, <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid card</a>, or UPI on PPI rails should be able to make digital payments via any network.LivQuik is the first PPI issuer in India to achieve full interoperability as mandated by the RBI. This feat enables customers to enjoy optimized card and UPI payments across wallets. Similarly, initiatives like <a class="link" href="https://m2pfintech.com/blog/central-bank-digital-currency-cbdc-101-a-primer/">Central Bank Digital Currencies (CBDC)</a> will further drive interoperability, inclusion, and innovation.<h2 class="heading-node" id="d3b9">Need for Interoperable Cross-Border Payments</h2>Interoperability in <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payments</a> is critical to making financial services accessible, affordable, and reliable. It involves coordination between multiple stakeholders, including central banks and regulators. It encompasses technical, regulatory, and usage interoperability to enable quick, convenient, secure, and seamless transactions regardless of the Financial Services Provider (FSP) network.According to a recent Visa survey, only 50% of merchants have a cross-border trade-compatible payment processing infrastructure. Without globally interoperable payment systems, small and medium-sized merchants cannot tap into international trade and markets. Interoperability levels the playing field and eliminates the inefficiencies of a closed-loop payment systems, i.e., payments between users of only one payment provider.An end-to-end interoperable platform delivers access to cross-border payment services through an integrated gateway. It enhances the user experience through its ease-of-use customer onboarding and <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">digital KYC.</a>A centralized interoperability platform calls for stringent global regulatory compliance and data security standards for utmost security. It enables faster reconciliations with real-time reporting and data-driven insights into payment patterns and customer behavior. Moreover, an automated platform saves time, reduces human error, and cuts costs. It enables infrastructure and data sharing which helps tech-driven payment ecosystems reach economies of scale.While international interoperability comes with a few challenges, it can be overcome with the support of the regulators, the global schemes, and a compatible business model across international borders and technology.<h2 class="heading-node" id="9178">Global Partnerships with Payment Networks</h2>A clear example of an interoperable <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payments</a> partnership is that between India’s <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> and Singapore’s PayNow. The need for faster cross-border payments and <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion</a> has been a catalyst in establishing the link between India and Singapore. The interoperable link between UPI and PayNow, enables instantaneous, cost-effective, and transparent payments across borders.Now for those new to UPI, it is India’s real-time payment system with a Virtual Payment Address (VPA). It is completely mobile-based and supports person-to-person (P2P) and person-to-merchant (P2M) payments and funds transfers.And PayNow is Singapore’s real-time payment system available to all participating banks and non-bank financial institutions. It is also a mobile-based system and enables peer-to-peer funds transfer using mobile numbers, VPA, or Singapore NRIC/ FIN. The UPI-PayNow partnership is only the beginning and is established to foster faster and smoother transactions between India and Singapore.India also holds strategic partnerships with the following payments networks and banks to enable seamless, interoperable transactions on our payments rails.<ul class="list-node" id="tpyzch3q0"><li>Discover Financial Services (DFS), US</li><li>Japan Credit Bureau (JCB), Japan</li><li>Union Pay International (UPI), China</li><li>Royal Monetary Authority (RMA), Bhutan</li><li>Mashreq Bank, UAE</li><li>Lycra Network, France (in the pipeline)</li></ul><h2 class="heading-node" id="1f35">Benefits of Payments Interoperability</h2>Interoperability benefits the entire payment ecosystem, including customers, merchants, end-users, and businesses. In addition to enhancing user experience and helping mitigate security risks, it delivers the advantages below.<ul class="list-node" id="ol9tnl3en"><li>Payment flexibility:&nbsp;The ability to accept all forms of payments is a game-changer. Universal payment acceptance helps customer retention and increases customer reach. Though there are several digital payment systems and digital offerings from payment system providers, customers are not required to sign into multiple systems and complete their <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> many times. Interoperability brings issuers and acquirers together to undertake, clear, and settle payment transactions across payment systems, ensuring universal payments and consumer retention.</li><li>Faster payment system: Electronic transactions are the key to reconciling and collecting payments, unlike cash-based systems. Advanced technology and fast internet connectivity make it easier to increase the speed of transactions.</li><li>Secure payment and POS integration: Integration pushes the transaction directly to the payment terminal and eliminates manual entries, thereby enhancing security.</li><li>Low operational costs:&nbsp;Integrated payment platforms reduce operating costs and seamlessly communicate with multiple devices across different financial service providers. It helps save money on adding new payment terminals.</li></ul><h2 class="heading-node" id="0b67">Addressing Challenges — Getting it Right</h2>Getting interoperability right through open <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-based platforms is a start toward harnessing and expanding the payments ecosystem. Interoperability can be tricky when dealing with legacy systems. Technical challenges usually comprise systems that use different technical standards, communication protocols, and related software and hardware infrastructure. Another common challenge relates to data and semantics. Payment systems may use different languages and need to be translated. Inadequate translation leads to corrupted or lost data.It is crucial to address the regulatory, technical, and business challenges of interoperability to make cross-border payments affordable, faster, transparent, and inclusive. Strategic partnerships with fintech firms, banks, exchange houses, and Money Transfer Operators (MTOs) with a focus on regulatory compliance and technology innovation will pave the way to overcome challenges and enable frictionless international transactions.<h2 class="heading-node" id="99d4">Need of the Hour for Today’s Generation</h2>Payments interoperability is the linchpin of today’s digitized economy. When done right, it can lead to greater convenience, speed, reliability, security, and seamlessness. It is the need of the hour today, as it enables people from all walks of life to benefit from the convenience that the cashless economy offers. It can increase service offerings, reduce costs, empower the end-user and help improve payment systems. Thus, interoperability is a strong facilitator for financial inclusion.By leveraging <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-based <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payment platforms</a> with simple integrations across domestic switches, bank accounts, mobile wallets/e-wallets, MTO transfers, and forex card solutions, we can enable financial inclusion and seamless payments across APAC and MENA regions. With India to start with and then extended globally.Along these lines, M2P is proud to partner with LivQuik for <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> services on exiting <a class="link" href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">PPI</a> offerings like cards, wallets, gift certificates, and other products. Thereby enabling interoperable payments on the LivQuik platform.Want to know more about building interoperable payment systems?Write to us at business@m2pfintech.com.<a class="link au ly" href="https://forms.gle/kJgVoD29t2vcxtbp9" target="_blank" rel="noopener ugc nofollow">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link au ly" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noopener ugc nofollow">LinkedIn</a>&nbsp;and&nbsp;<a class="link au ly" href="https://twitter.com/m2pfintech" target="_blank" rel="noopener ugc nofollow">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Why Payments Interoperability is a Must for Today’s Generation?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_01.webp" alt="M2P Fintech" title="" width="100%" height="447">India’s first step toward building a world-class digital payments ecosystem was earmarked by the launch of the Unified Payment Interface (UPI) in 2016. The advent of UPI transformed the dynamics of the Indian payments landscape. While demonetization drove the adoption of digital payments, the pandemic fueled the surge in UPI, making it the most accepted digital payment mode in the country. Today, UPI is ubiquitous and the largest retail payment system in terms of transaction value and volume.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_02.webp" alt="M2P Fintech" title="" width="100%" height="447">This brainchild of the National Payments Corporation of India (NPCI) is regulated by the Reserve Bank of India (RBI) and supported by Indian Banks Association (IBA).<h2 class="heading-node" id="7e64" style="text-align: justify">What is UPI/ UPI Transaction?</h2>UPI is a mobile payment system that entitles users to transfer money to another party instantly. It facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. A user can link multiple bank accounts in a single UPI-enabled mobile application and make transfers without entering the bank details such as account number, IFSC code, or net banking user-id/password.Although UPI transactions are akin to NEFT/RTGS/IMPS, it’s more standardized across banks, convenient, hassle-free, and have zero/minimal charges. UPI not only enables quick bank transfers from wherever within a few clicks, but it also boosts transparency and interoperability. UPI apps use a unique identifier (otherwise known as UPI ID) to send/request money faster than NEFT and work 24 X 7. It also upholds contactless payment by generating a specific QR code for each user account.<h2 class="heading-node" id="7d62" style="text-align: justify">How does UPI work?</h2>UPI payment system has become a fundamental part of our daily lives. We have leveraged the UPI apps to make payments to merchants/Kirana stores or send/request money from our friends or family.Here is how a UPI transaction usually takes place.<ul class="list-node" id="sp7szltdm"><li>User downloads UPI app from play store</li><li>Specifies the mobile number to connect the device to the service provider</li><li>Upon authorization, creates a profile by setting up the Virtual Payment Address (VPA), otherwise known as a UPI ID</li><li>Links the bank account with UPI ID using the registered mobile number</li><li>Looks up another user/merchant through their mobile number, UPI ID or QR code to initiate a transaction</li><li>The payer enters the UPI pin to complete the transaction and transfer the money to the payee’s account</li></ul>(Note: It is important to note that the sign-up flow for a merchant is identical)Looks like a simple process, right?Well, there is much more going on in the background to make a UPI transaction successful. For example, during a UPI transaction, the money from the sender’s bank account is first transferred to the payment app’s pooling account or general ledger (GL) and then to the receiver’s bank account. This ecosystem primarily involves five entities.1. Payer PSPPayer PSP is nothing but a Payment Service Provider that allows customers to send money via digital transactions. It captures PIN/Biometric authorization credentials, validates, and sends a payment request to the Payee PSP via UPI.2. National Payments Corporation of India (NPCI)NPCI acts as a trusted switch between the banks and Payment service providers (PSPs). The role of NPCI is to manage the data flow between the banks and the payment apps and route it to the correct and verified destinations.3. Remitter BankRemitter Bank refers to the sender/payer’s Bank, also known as Issuing Bank. Upon NPCI’s request, it deducts money from the payee account and sends a response to NPCI once the debit is successful.4. Beneficiary BankBeneficiary Bank refers to the merchant/receiver/payee’s Bank, otherwise known as Acquiring Bank. It processes the credit request from NPCI, credits money to the payee’s account, and sends a response to NPCI once the credit is complete.5. Payee PSPUpon receiving the request, the Payee PSP acts as a Beneficiary PSP and provides the account details against a virtual address credit request. It validates the payee details and sends a response to the UPI to receive funds from the payer.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_03.webp" alt="M2P Fintech" title="" id="hkz1t9gjg" width="100%" height="447"><h2 class="heading-node" id="230c" style="text-align: justify">Types of UPI Transactions</h2>UPI transactions are classified into two types:Direct PaymentDirect payment or push payment refers to sending money. Here, the payer (the sender) initiates the transaction. For example, sending money to your friends/family or paying a merchant at the checkout by scanning a QR code. In direct payments, the user can initiate the transaction using the UPI ID or QR code.Collect RequestA transaction is called a collect request when the payee (the receiver) starts the transaction. Say, you are shopping online, and you choose the payment mode as “via UPI,” and enter your UPI ID, then, a collect request with the bill amount will be sent to your UPI app. Once you accept the request, the payment will be processed. This is a typical example of a collect request. A collect request is also known as a pull payment and can be initiated only by UPI ID.<h2 class="heading-node" id="f8d3" style="text-align: justify">Features and Benefits of UPI</h2>Since its launch, UPI has made financial transactions much easier for account holders. With over 200 banks, many digital wallets, and payment applications supporting UPI, funds transacted over UPI are already more than those transacted through debit and credit cards.Virtual Payment Address (VPA) or UPI ID is the key feature of UPI. UPI Virtual Payment Address is represented as&nbsp;&lt;unique_identifier&gt;@&lt;address_provider&gt; and serves as the addressing layer for a bank account. It helps sustain privacy and keeps a check on financial frauds.Here are some of the benefits of the UPI Payment system.<ul class="list-node" id="wkxiyj1oy"><li>Universal payment system for accessing multiple bank accounts</li></ul>UPI empowers the users to link numerous banking accounts with a single UPI-based app and allows users to choose one account as a default account for making payments. This is the main advantage of UPI, as it eliminates the need for installing individual apps for different banks.<ul class="list-node" id="f2dvpeheq"><li>Unique identifier enables easy and more secure transactions</li></ul>UPI addresses the security and privacy concerns by implementing the user-specific Unique Identifier (UPI ID or VPA). The user can transfer funds using the UPI ID, thus ridding the need to provide the bank account details. Additionally, the UPI ecosystem has single-click two factor authentication to protect users from financial fraud during digital transactions.<ul class="list-node" id="0lmse4odg"><li>Expands business opportunities for banks</li></ul>UPI has made P2M transactions hassle-free and convenient. Almost every local grocery shop and street vendor have QR codes to accept UPI transfers/payments. This empowers banks to tap into the C2B segment. It also supports the growth of ecommerce transactions and has made online shopping quick and effortless as it drastically reduces the time taken to process a payment.In a conventional card transaction, the user enters the debit card/credit card number, expiry date, and CVV code and waits for the OTP to make a payment. With UPI, the user enters the UPI ID and gets an alert on their phone to verify the transaction and completes the payment within a few seconds. This gives banks the opportunity to infiltrate the ecommerce/m-commerce sector.<ul class="list-node" id="hg4d8be12"><li>No need to register the beneficiary</li></ul>Unlike IMPS/NEFT, UPI does not ask users to fill in banking details such as account number or IFSC code to register the payee as a beneficiary. This means the users need not wait for 30 minutes (in most cases) to activate a beneficiary. The interface allows the users to transfer money by simply keying in the virtual address or UPI ID to make the requisite payment.<ul class="list-node" id="premz2wts"><li>Instant transfer — anytime anywhere</li></ul>Customers can do UPI-based transactions round-the-clock, 365 days. Users can make payments or transfer funds instantly from anywhere at any given point of time without worrying about banking hours, bank/public holidays, or even a bank strike.<h2 class="heading-node" id="0586" style="text-align: justify">How is India using UPI?</h2>With over 200 million users and 323 banks on the bandwagon, UPI exhibited stupendous growth in terms of the number of users and transactions. Thanks to the scalability, UPI saw newer heights in May 2022. It clocked 5.95 billion transactions in May 2022 *, the highest number of monthly UPI transactions ever since its inception in 2016. Moreover, it recorded a 10% month-on-month growth not only in total transactions but also in value. (*As per NPCI data).<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_04.webp" alt="M2P Fintech" title="" width="100%" height="447">Connectivity and convenience are the prime factors contributing to the growing preference for UPI among customers and merchants. The most used UPI-based applications are PhonePe, Google Pay, Paytm, Amazon Pay, MobiKwik, iMobile, Chillr, and the BHIM app. Some popular banking applications with UPI features include Axis Pay, Baroda MPay, Pockets-ICICI Bank, SBI Pay, Yes Pay, and Airtel Money.Scaling up UPINPCI and RBI have constantly been scaling up UPI’s serviceability. At first, UPI payments could be made only via bank accounts. Then, UPI apps allowed users to add debit card details for transactions. Now, RBI has announced Rupay credit cards can be linked to UPI for payments. Experts believe it will not be long before Visa and Mastercard credit cards join the club.UPI 123 PAYUntil recently, UPI was limited to smartphone users with an internet connection. While India is home to over 180 crore mobile phone users, only 78 crore have smartphones and the rest use feature phones. To empower all such users to leverage the mainstream digital payments system, the Reserve Bank of India introduced a new mode of payment mode, UPI 123PAY, on March 8th, 2022.Since its launch, the platform has recorded 21,833 successful transactions with more than 37 thousand registered users. Economic experts claim this is undoubtedly the beginning of digital financial inclusion.Aadhaar-based activationFurthermore, NPCI included a unique feature in UPI for customers who do not own or wish to own debit/credit cards. It enables such users to activate UPI using their Aadhaar number. The OTP required to set up the profile will be sent to the mobile number linked with the Aadhaar card. Upon verification, the user can create the profile and initiate the transaction. However, the feature is yet to be launched for public use.<h2 class="heading-node" id="531e" style="text-align: justify">NIPL and international partnerships — UPI around the World</h2>The success of UPI took the world by storm. In fact, several countries are trying to replicate UPI’s settlement infrastructure. With this incredible technological feat, the Indian fintech industry is at the forefront of some of the most developed countries.NPCI established a special payments arm, NPCI International Payment Ltd (NIPL), to internationalize RuPay and UPI and facilitate real-time bank account payout in India. NIPL inked partnerships with several countries such as the UAE, the US, the UK, Nepal, Bhutan, China, Japan, and Singapore to launch Indian payment rails in their jurisdictions.Some of the prominent international partnerships include LuLu Financial and Al Ansari Exchange (UAE), Discover Financial Services (DFS) (USA), Japan Credit Bureau (JCB) (Japan), Union Pay International (UPI) (China), PPRO Financial (UK), Monetary Authority of Singapore (MAS), Network for Electronic Transfers (NETS), and Liquid Group, (Singapore), and Royal Monetary Authority (RMA) (Bhutan).As an inland initiative, in 2021, Induslnd Bank joined with NPCI to simplify cross-border payments or NRI remittances. The bank is said to use UPI ID to transfer money to the beneficiary. According to the agreement, Induslnd Bank will act as a gateway between the MTOs and NPCI’s UPI system for validating and settling payments into the payee’s account. With this new partnership, IndusInd Bank will become the first Indian bank to offer cross-border payments or NRI remittances via UPI. The product is in the testing phase and is expected to go live in Q2 of 2022.These partnerships are significant milestones in the evolution of the UPI payment system as it is expected to enable hassle-free low-value transactions and cross-border remittances.UPI is the cornerstone of India’s economic transformation and revolution, aiding the country to move into the future with a paperless economy, thereby curbing the money laundering activities and tax evasions. The interface has a tremendous potential to empower the development of next-generation digital platforms for lending and payments.If you wish to implement UPI in your business, write to us at&nbsp;<a class="link au mz" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

UPI - The Driver of Economic Growth and Inclusion

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Artboard-1-copy-8-6.webp" alt="M2P Fintech" title="" id="9lksxlzsk" width="100%" height="528">It’s been 3000 years. Not a single day passes without the usage of money.Be it physical or digital, the movement of money signifies value and hope to the millions involved. Money transfer operators, banks, and <a class="link" href="https://m2pfintech.com/blog/fintech-101-discover-the-3ws-of-fintech/">fintechs</a> have played a remarkable role in enabling seamless money transfer in a quick, secure, and convenient manner.<h2 class="heading-node" id="19yqmhede" style="text-align: justify">Shift from Cash to <a class="link" href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">Cashless</a></h2>Money was not always fancy as crisp notes and lightweight coins three thousand years ago. It had a humble beginning taking the form of cowrie shells, rail stones, farm produce, and livestock to be used as exchange. Slowly precious metals like gold, silver, and copper were used in trade. Then cash in the form of metal coins and currency notes came into prevalence.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Infographic-1.webp" alt="M2P Fintech" title="" id="zrmpc1bbw" width="100%" height="1321">Today, the world has transitioned from cash to a <a class="link" href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">cashless economy</a>. <a class="link" href="https://m2pfintech.com/blog/payment-cards-design-made-simple-heres-what-you-need-to-know/">Payment cards</a>, QR codes, contactless modes, cryptocurrencies, and <a class="link" href="https://m2pfintech.com/blog/central-bank-digital-currency-cbdc-101-a-primer/">digital currencies</a> are hogging the limelight as they are super convenient, simple, and secure ways of moving money and making payments.<h2 class="heading-node" id="2421" style="text-align: justify">Evolution of Money Transfer</h2>Changes in customer expectations, the need for enhanced experiences, and the growing cyber security issues demanded an evolution in money transfer. Payment apps, digital wallets, wearables, and real-time payment platforms are doing their best in fulfilling this quest by enabling quick, simple, and secure Peer to Peer (P2P) and Peer to Merchant (P2M) transfers and payments.Curious to know when and how money transfer began?Here you go.<h3 class="heading-node" id="d1f6" style="text-align: justify">Hawala</h3>The hawala system is the oldest form of money transfer that dates back to the 8th century. Known as the “money transfer without money movement,” it was actively used in India, the Middle East, and South Asia.Heavily based on trust between hawala agents, the transfer is usually done without any promissory notes. The hawala agents could be friends, family, or trusted acquaintances who settle debts between parties with cash, property, or services.Here’s how hawala works.The sender gets in contact with a hawala dealer A to transfer money to another country. As soon as the money, commission, and beneficiary details are shared, the sender receives a unique secretive code. Then the hawala dealer A contacts dealer B from the recipient country. Dealer B then delivers the amount to the designated receiver after revealing the secretive code. The unique code will reconfirm if the receiver is the right individual or not.The hawala system is still in use as an alternative to the remittance channels and traditional banking systems.<h3 class="heading-node" id="cfd9" style="text-align: justify">Wire Transfer</h3>Next in line was wire transfer, the electronic mode to transfer money through a global network. It was known for its fast, irreversible, foreign, or domestic electronic money transfers. In the 19th century, Western Union was the first money transfer operator to introduce wire transfers.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Infographic-2-V2.webp" alt="M2P Fintech" title="" id="8tw76fb9s" width="100%" height="661">Here the sender had to reach out to the office with the money, and the operator would send a message and ‘wire’ those funds to the destined location. Codes and passwords were used between the parties involved to ensure security. Soon wire transfer became an integral part of moving or exchanging money internationally, and it still is.<h3 class="heading-node" id="750d" style="text-align: justify"><a class="link" href="https://m2pfintech.com/blog/payment-cards-design-made-simple-heres-what-you-need-to-know/">Payment Cards</a></h3>Metal money was the first precursor to the present-day cards. It was issued by Western Union in 1914. A few years later, in 1928, the Charga-plate was introduced in the US, which was offered by merchants to their regular customers. They became popular among the department stores, as they could issue cards on their own. These were the first transactional cards in history.Later in the year 1946, John C. Biggins of Flatbush National Bank of Brooklyn introduced the “Charg-It” card, which allowed people in a two-square-block radius to charge purchases to the bank. Charg-It was an easy way for consumers to use the card at multiple businesses. Merchant however had to leave sales slips with the bank.Then came the Diners’ Club card in 1950, which was the first real <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit card</a>. Called a Charge Card, its cardboard form gained massive popularity and acceptance among users. It charged merchants a 7% fee on every transaction and delivered one monthly bill on dining expenses to the cardholders.A decade later, the turning point in card transactions happened. Banks introduced ATM machines. After this move, cards were used at ATMs to withdraw cash and make deposits.In the early 90s, credit card adoption in India was slow. People who travelled to foreign countries were the only ones to use the Diners cards in India in the 1960s. It nearly took 15 years for the Diners card to reach 8,000 registered users in India.In 1980, the Central bank of India brought in credit cards in association with Visa and Master Card. As a result, debit and credit cards became the dominant source for non-cash payments, which retailers and consumers readily accepted.<h3 class="heading-node" id="4276" style="text-align: justify">SWIFT Transfer</h3>In 1973, SWIFT transfers came into existence. They were typically wire transfers but done via the Society for Worldwide Interbank Financial Telecommunications (SWIFT) network. This global messaging network helped improve the speed, transparency, and consistency of payments. It changed the perception of how the credit system worked and became a globally recognized provider of secure financial messaging.<h3 class="heading-node" id="f5e7" style="text-align: justify">Growth of Online and Mobile Money Transfers</h3>In the late 90s and early 2000s, electronic deposits, <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">digital remittances</a>, and mobile money transfers became prominent. The following payment systems facilitated money transfers from anywhere, anytime, without any hassles.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Illustration-NEFT-V2.webp" alt="M2P Fintech" title="" id="llvfslid3" width="100%" height="661"><ul class="list-node" id="4rj8aja12"><li><a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a></li></ul>Introduced by the National Payments Corporation of India (NPCI) and the RBI in 2015, <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">the Unified Payment Interface (UPI)</a> is an easy way to transfer money in real-time from one bank to another. Here, the UPI ID acts as the virtual payment address, and UPI PIN is the security password to authenticate the transaction. These are only two things required to transfer money. UPI eliminates the need to enter complex bank account details to initiate a money transfer.<ul class="list-node" id="u29byozm5"><li>IMPS</li></ul>Immediate Payment Service is an instant fund transfer service and can be simply defined as NEFT+RTGS. It ensures real-time interbank funds transfer in the Indian banking system provided by banks. The cap on transaction limit is set very low to avoid fraudulent complaints. In order to make an IMPS transfer, you just need to know the destination account holder’s IMPS id (MMID) and their mobile number.<ul class="list-node" id="nix10ovkr"><li>RTGS</li></ul>The ‘Systemically Important Payment System,’ Real Time Gross Settlement (RTGS) System was introduced in 2004. It is a secure electronic fund transfer system that provides real-time online settlements for bank transactions across the country.<ul class="list-node" id="h04bgsk39"><li>NEFT</li></ul>National Electronic Fund Transfer (NEFT) was introduced in 2005 and soon became one of India’s prominent electronic fund transfer systems. It is the most secure way of transferring funds from one bank account to another. Here, the funds are transferred using the Reserve Bank of India’s NEFT infrastructure, which is a nationwide payment system facilitating safe and secure transactions all over the country.Now, this is not all. There are several other money transfer modes that involve virtual and cryptocurrencies. We’ll cover them in subsequent articles.Feel we’ve missed out on something. Let us know in the comments below.<h2 class="heading-node" id="2754" style="text-align: justify">The road ahead</h2>Newer technologies and <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API-based</a> tech stacks are paving the way for quicker, robust, hassle-free money transfer processes. Banks and money transfer operators leverage fintech partnerships to enable great remittance experience, cut costs, and manage backend integrations and tech infrastructure. Robust security verifications and <a class="link" href="https://m2pfintech.com/blog/why-is-risk-based-authentication-rba-critical-for-banks/">risk management systems</a> promise a secure, real-time flow of money across borders.Want to know more about digital money transfers? Write to us at&nbsp;<a class="link au md" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Tale of Money Transfers: From Hawala to One-click Remittances

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-8-2-3.webp" alt="M2P Fintech" title="" width="100%" height="529">BNPL (Buy Now Pay Later) has become the talk of the payments industry for a good reason. It gives shoppers the ultimate convenience of instant credit access, zero interest rates, and hassle-free repayment options. Irrespective of the demography, BNPL provides a level shopping field for consumers across credit scores and purchase ability. It triggers consumer buying behavior by reducing the cost of purchase at the point of sale. Merchants and lenders gain significant competitive advantages when they deploy BNPL solutions. This inclusive consumer financing instrument helps merchants increase conversions, customer acquisitions, Average Order Value (AOV), and customer retention. Lenders benefit from optimal utilization of credit lines and the ability to build a scalable credit funnel while increasing revenue.<blockquote class="block-node" id="c39qhv3se">The Indian BNPL market size is expected to reach $ 56 billion by FY26 and accounts for 5 percent of digital P2M (Peer to Merchant) payments by FY26E, according to HDFC Securities.</blockquote><h2 class="heading-node" id="64ab" style="text-align: justify">Thriving Business Models</h2>The rise of consumer demand in the BNPL market has led lenders to rethink business models on a case-to-case basis. However, some of them are quite consistent in delivering profitability across lender profiles. Let’s check out the thriving business models that lenders use to drive the BNPL narrative forward.<h2 class="heading-node" id="a84f" style="text-align: justify">Card-based BNPL model</h2>Also known as post-purchase BNPL, the card-based BNPL allows lenders to offer no-cost EMIs to existing debit or credit cardholders after they purchase on merchant platforms. Banks, NBFCs, and fintechs can issue virtual cards for small-ticket purchases to consumers, which is acceptable with almost every merchant accepting card payments. Falling under the open network category, this model doesn’t require any prior agreement with merchants and lenders. Core considerations<ul class="list-node" id="ngcpo711t"><li>Only suited for banks that own a significant number of cards issued to their consumers.</li><li>This post-purchase BNPL solution doesn’t serve the purpose of increasing purchases and revenue for merchants.</li><li>Could cannibalize the bank’s credit card revenue when consumers with debit cards start deferring payments through post-purchase BNPL.</li><li>Doesn’t target new bank users, as it extends no-cost EMIs to existing cardholders.</li></ul><h2 class="heading-node" id="aad5" style="text-align: justify">Multi-lender platform model</h2>In this model, lenders can use BNPL payment options across merchants for their underwriting and risk management strategies. When consumers apply for instant credit for buying products or services across the merchant platform, the information is passed onto the cohort of lenders who access consumer risk profiles and choose to provide credit.For instance, if lender A declines the consumer, the same consumer profile is accessed by lender B and so on until that consumer is approved for credit. This model is the most consumer-friendly option as there is a high chance that one or more lenders will approve the credit. Examples of these providers include GreenSky, Divido, ChargeAfter, and Vyze, serving merchants like Abes of Maine, Wayfair, and Home Depot.Core caveats<ul class="list-node" id="55te5atgx"><li>Pits lenders against each other. Hence there is increased competition to issue credit and make profits.</li><li>Lenders won’t get control of the buyer journey and purchase behavior as the BNPL platform provider and merchant control the consumer data.</li><li>As multiple lenders are involved in the process, their brand recognition suffers.</li><li>The recollections and repayments cycle is managed by the BNPL platform provider, which makes them the primary point of contact for shoppers.</li></ul><h2 class="heading-node" id="0a01" style="text-align: justify">Embedded Checkout Model</h2>Embedding BNPL in the checkout page enables instant credit to consumers across merchant platforms. It also helps with personalization and consumer lifecycle management. In this model, lenders provide capital and underwriting facility to fund the embedded pay later option at the merchant’s checkout. The lenders enjoy an exclusive partnership with the merchant and can analyze shopper data to strengthen their decisions. They can tie up with a technology stack provider or build their own platform for issuing credit. One such example is the Amazon Pay Later backed by Capital Float and IDFC First Bank.Points to Ponder<ul class="list-node" id="o3urwdnon"><li>Lenders won’t enjoy brand recognition in this model as the merchant controls the entire customer journey.</li><li>Lenders need to align with merchants and tech stack providers to manage the risk and changes in the business strategy vis-à-vis rewards, promotion campaigns, etc.</li></ul><h2 class="heading-node" id="9cd5" style="text-align: justify">Self-enabled BNPL model</h2>Using this model, lenders can start their own BNPL platform and control the complete consumer loan cycle right from loan origination to credit line issuance, transaction management, repayment, and collection. This will provide them with the opportunity to integrate the Pay Later checkout option with preferred merchants. They can also have a dedicated interface to assist consumers with the entire BNPL lifecycle like transactions management, credit limit utilization, repayments, etc., through a dedicated application or by integrating this interface with the existing consumer application. Lenders can offer preferred customers with extended EMIs and rewards programs. Examples of this model include M2P’s BNPL stack for launching pay later programs for lenders.Key Benefits<ul class="list-node" id="fczisztz4"><li>Lenders have the option to manage the entire loan lifecycle and customize the platform for each consumer segment present across the merchant platform.</li><li>Based on the target consumer base and average ticket size, lenders can decide on the merchants they want to onboard on their platform.</li><li>Lenders get the option to own the complete consumer buying journey and increase brand recognition.</li><li>As the BNPL solution caters to people with low credit scores, making timely repayments gives lenders insights into further lending opportunities and builds consumer credit scores.</li></ul><a class="link au ns" href="https://m2pfintech.com/" target="_blank" rel="noopener ugc nofollow">M2P</a>&nbsp;enables banks, NBFCs, and fintechs to launch BNPL programs by leveraging its multi-module expertise and capability to manage onboarding, credit line issuance, lender management, collection, reporting, and reconciliation. Our full-stack Lender Management System helps lenders manage entire loan lifecycles across different merchants and platforms. Multiple use cases can be built as per the value chain requirements such as credit limit criteria, KYC, and multi-channel distribution such as physical/virtual card, UPI, wallets, NFC, and direct integrations with merchants, repayment options, and rewards/cashback, among many other data points. We help lenders go to market with one-click BNPL checkouts, card issuance, and seamless integrations at a 5x faster pace.Want to deploy the best BNPL solutions? Write to us at&nbsp;<a class="link au ns" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a>&nbsp;and let’s get started.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

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