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Digital Wallets & NFC enabled payment options for consumers

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RBI had permitted NFC enabled payments earlier this year, looking at the growing credit card and debit card user bases in India (~ 375 million). NFC stands for Near Field Communication, also known as ‘Contactless’.

Contactless cards or NFC cards enable users to make payments by waving or tapping the card near the contactless reader instead of swiping or dipping it, making the transactions faster and secure, without any need to handover one’s card to the merchant.

NFC technology is now available with many big banks as well as service providers / payment banks in India and has become popular worldwide more due to mobile OS players such as Apple, Google, Samsung etc. who have released mobile phones capable of NFC. This means the mobile phone can be used to make payments just like a physical debit or credit card. The payment adoption has been big in other continents due to the infrastructure set up, which is not cheap.

Other than the millions of POS terminals in India that are currently being converted to enable contactless card payment, other transit terminals such as buses, trains, metro etc.

We now have payment banks as well as national banks offering NFC or contactless or Tap & Pay modes for customers. Some salient points:

  1. NFC is also referred to as ‘Tap and Pay’ especially in the scenario of NFC enabled mobile phones. Also sometimes referred to as ‘Digital Wallet’.
  2. NFC is considered superior to magnetic swipe cards or chip cards because the card or phone never leaves the possession of the accountholder.
  3. Usually it works on the principle similar to prepaid cards. RBI has set a limit of Rs.10000/- as prepaid credit into these digital wallet.
  4. Some Indian banks have launched Tap and Pay for mobile users to pay without a card. E.g. ICICI
  5. RBI has waived any PIN authorization upto a spend of Rs.2000/-
  6. ikaaz, a mobile payment company has introduced a solution where even non-NFC enabled cards or phone
  7. Ola money has been launched recently. Uber is following suit. Future group is launching mobile wallet. There are currently half a dozen or more digital wallets available for consumers to choose from. Not all digital wallets use NFC technology. There is also an active use of wifi, QR codes, Bluetooth 4.0 or beacon technology being used for enabling mobile payments
  8. Digital wallets with / without NFC are still under the radar on clarity around security in the event of fraud.
  9. The big 3 players are Google, Apple & Paypal.
  10. Credit Card players are purported to be sureshot winners in this entire game of digital payment, especially with IoT (Internet of Things) resulting in a connected era.
  11. Key to the success of digital payments is the adoption by retailers and consumers.
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