Your money is no longer a piece of paper and ink, changing hands, getting soiled and landing up at a bank exchange counter. Theoretically, it may still happen, but much of this is history in the era of digital transactions. What kicked off with ATMs, debit/credit cards and Internet banking has now evolved into touch-and-go Web and mobile apps. They cover every aspect of our financial life, be it banking, borrowing, investing, tax filing, buying insurance or paying bills. But technology becomes obsolete fast, and by the time you are adept at using one, an advanced version comes into play. Of course, cash will not die all of a sudden, but you can manage your money better digitally, with a vast range of tech tools to choose from. But before we look at the latest technology changes and how you can make the best of it, a brief overview would not be out of order.
The most revolutionary tech feature is the ability to make and receive payments at any time, no matter how far the transacting parties are. "India's payments ecosystem has been recognised as global best by several developing and developed countries. The country has built a sound legal framework and state-of-the-art infrastructure, and they have contributed to digital payments adoption," says Monish Shah, Partner at Deloitte India. "The exponential adoption of digital transactions has made India a less-cash economy, and the trend is likely to continue with improved digital literacy."
The dramatic cost reduction in telecom data charges and the growing penetration of smartphones have helped in this transformation. But biometric authentication via Aadhaar has been most effective for KYC (know your customer) verification and has helped financial organisations increase their digital reach at a minimal cost. The Supreme Court halted this procedure, but the Indian government resumed it for speed and convenience. Banks and non-banking financial companies (NBFCs) are now allowed to use Aadhaar numbers for KYC verification, based on customer consent, and this has paved the way for even greater assimilation.
The New Face of Banking
Gone are the days of giant ledgers, paper cheques and physical accessories of traditional banking. Now, all banks feature dedicated mobile apps and websites, to say nothing of the chatbots - our virtual customer service executives. Banking entered a new era in 2016 when Asian major DBS launched a mobile-only bank (digibank) in India. It was a paperless, signatureless and branchless affair that combined biometrics and artificial intelligence (AI). Opening an account here takes 90 seconds and customer verification is done via Aadhaar. The speed and convenience have kept people hooked, and it has been able to attract 2.5 million customers in three years. More innovations have come in, and several debit and credit cards now allow you to use the tap-and-pay feature for cashless, contactless and PINless payments for up to Rs 2,000. "People have a seamless experience when they book flights, taxis, hotels or movie tickets. Savings, investments and loans should be no different," says Shantanu Sengupta, Managing Director and Head of Consumer Banking Group at DBS Bank India.
India's central bank has kept pace with these changes, making sure that banking remains seamless and secure for account holders. The Reserve Bank of India (RBI) mandates that a customer will not be held liable if the fraud or negligence is on the part of the bank or has happened due to a third-party breach, provided the bank is notified within three working days. If an account holder reports it within seven days, his/her maximum liability will be limited to Rs 25,000.
The RBI is changing the timings of national electronic fund transfer (NEFT) from December 2019, making it available 24x7, to encourage digital transactions. As of now, this channel can be used between 8 a.m. and 7 p.m. on working days. Timings of RTGS (real-time gross settlements) were also extended from 4.30 p.m. to 6 p.m. in June this year. Besides, the central bank has waived the processing charges levied on NEFT and RTGS to make online payments more attractive.
The National Payments Corporation of India (NPCI), which had launched Immediate Payment Service (IMPS) to enable interbank fund transfers, chipped in. The NPCI built a Unified Payment Interface or UPI based on the IMPS technology. It is a mobile platform that allows money transfers from one bank to another with the help of a virtual payment address, and users need not reveal crucial bank data. You can do much more with your UPI ID, though. Link it to pay your Uber or Ola or subscribe to IPOs on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). "The NPCI is considering the use of blockchain technology to enhance and promote this platform further," says Shah of Deloitte India.
The Fintech Push
It was the emergence of prepaid mobile wallets that inevitably changed the cashless payment landscape. Paytm was the best-equipped mobile payment service platform in those days but got an almighty lift after demonetisation in November 2016 and outpaced all until the launch of the UPI. The latter's growing popularity was a red flag to many, but a few dwindling e-wallets clawed their way back into the game by offering transactions via UPI. Players like Google Pay and PhonePe have seized this opportunity to enhance their reach on the UPI platform. But overall, Paytm continues to lead due to its wide range of offerings.
The rise of QR (quick response) code payment has also pushed cashless transactions between merchants and customers. A merchant accepting QR code payment prints his QR code profile to receive payment. A customer can scan it with a mobile app and pay through prepaid wallet, net banking or credit card, depending on the type of the QR code and the mobile app he/she is using. It is a cost-effective replacement of electronic data capture machines and NFC (near field communication) devices.
While many players offer their proprietary QR codes, a few work as aggregators and allow you to scan and pay for QR codes from multiple sources. For instance, ICICI Bank's m-banking app offers a QR scan feature that accepts QR codes from various platforms such as Visa, Mastercard, UPI, RuPay, BharatQR and ICICI Bank's mobile wallet called Pocket. In contrast, BharatPe is an aggregator and offers a QR code that works on multiple payment platforms. The BHIM QR code is UPI-based and mostly used for peer-to-peer (P2P) and peer-to-merchant (P2M) transactions using a virtual payment address. For the Bharat QR code, additional data elements such as merchant name, address and bank information are included as it is specifically used for P2M transactions wherein payments are made via cards. Here, each payment has to be authorised by an mPIN (passcode). This keeps your account safe even when you lose your phone as no one else knows the mPIN. If your phone is lost or stolen, contact your bank immediately and block all transactions through the app. QR code payments are likely to get bigger as the GST Council is planning to make them mandatory for shops with an aggregate turnover above a particular threshold.
Investments Go Digital
Open a Demat account within minutes (it is a paperless process) for online investments in stocks, futures & options, exchange-traded funds (ETFs), bonds and commodities. Also, seek professional help online from discount brokerage firms like Zerodha or 5Paisa, which charge a flat fee and keep it well below the charges of a traditional full-service broker. As per a July mandate, you have to use UPI payment for IPO application if you are a retail investor operating through a broker, depository participant or a registrar and transfer agent. "The new (payment) process will increase efficiency and eliminate the need for manual intervention and logistics at various stages," says Praveena Rai, COO of NPCI. "The UPI 2.0 mandate of one-time blocking also ensures that the amount remains blocked (and not gets debited) in the customer's account until the allotment is done, as is currently happening in the ASBA (applications supported by blocked amount) process."
Most mutual fund (MF) houses and several intermediaries allow customers to invest and redeem units online. Transact in direct plans online and enjoy cost advantage as you need not pay any commission to intermediaries. Then there are online platforms like Paytm Money, which direct people to these investor-friendly MFs. "We offer free-for-life MF investment accounts at zero fees, zero charges and no commissions. Most of our KYC requests are verified within 30 minutes and they are 100 per cent paperless. You need not courier paper documents or visit a brick-and-mortar service centre of an asset management company," says Pravin Jadhav, Whole Time Director at Paytm Money.
Breezy Insurance Experience
Insurers and their customers have benefited most as digital platforms offer wider reach, countless choices and operational ease. When policies are purchased online, companies save on precious distribution and processing costs incurred in offline deals. This saving is passed on to customers who buy policies online. In fact, online term insurance has gained popularity due to reduced premiums compared to offline pricing. And the same goes for health and auto insurances. "The digital platform is a low-cost point of sale, and studies show that by 2020, three out of four policies would be influenced online. Going digital has a disruptive impact on everything - from sales and marketing to post-sales services and claims management," says C.S. Sudheer, Founder and CEO of Bengaluru-based IndianMoney, an online platform offering free financial advice and education.
Vaidyanathan Ramani, Head of Product and Innovation at Policybazaar, a Gurgaon-based insurance aggregator and policy marketplace, concurs. "There are provisions for offering differential rates in the health insurance space and companies like Max Bupa and Star Health Insurance, among others, have differential pricing for online plans. In auto insurance, these provisions are part of the underwriting," he says. Besides, with all product information available online, buyers find it easy to compare policies, make informed decisions and save on costs.
People buying life insurance has a different agenda altogether - that of fast and smooth claim settlement in case of an untimely death. Automated claim processing becomes a necessity in such cases, but insuretech in India is mostly limited to sales and distribution instead of claim disbursal. The scenario is changing, albeit slowly. The Insurance Regulatory and Development Authority of India (IRDAI) is taking proactive steps to make claim settlement more efficient and transparent. And technology has stepped in to enhance the customer experience. "A few companies have been able to digitise almost all the steps involved in the claim process. For instance, notification and registration of claims are always done online, and agreement (closure with the customer) is mostly done that way. The payment part, as per the IRDAI regulation, has been digitised as well. However, loss assessment is largely done offline. Companies usually commission these to their internal assessors or qualified third-party experts," says Ramani. Some companies, especially those in auto and travel insurance space, have already started using AI and blockchain technology for processing damage claims. But these procedures need to evolve and scale.
Inheritance is another tricky topic when there is a death in the family. Of course, a last will and testament, properly done, would leave no scope for confusion. But people rarely make their wills due to a lack of procedural knowledge and the perceived difficulty in execution. This should not trouble you anymore as online will writing companies abound and your insurer can help as well. One such company is Aviva Life Insurance. "Now that we have launched the Aviva will writing service for free, the company aims to educate people on the importance of making a will. It makes inheritance smooth and hassle-free when a person is no more. With the help of our service, users can draft a will within 15 minutes, in three simple steps," says Anjali Malhotra, Chief Customer, Marketing, Digital and IT Officer at Aviva Life Insurance.
Online Lending Touches More Lives
Online borrowing has evolved dramatically due to digital innovations. In the beginning, lenders and intermediaries came online to carry out initial enquiries. Next came loan processing. Now, much of the assessment is done online so that both existing and new borrowers (without any credit history) can get loans from banks, NBFCs or P2P lending platforms. This has become possible with the development of new credit appraisal models which work on personal profiles and digital footprint of the borrowers.
"Around 30 per cent of customers are without any credit history. We consider all such applicants after going through more than 100 different data point checks, analysed by digital algorithms. It gives us an in-depth analysis of personal, professional and financial status. If an application passes through all algorithmic checks, it gets approved," says Bhavin Patel, Co-founder of LenDenClub, a Mumbai-based P2P lending marketplace. According to Aditya Kumar, Founder and CEO of Bengaluru-based personal loan provider Qbera, "Fintech lenders have a clear edge in terms of quick turnaround, tenure and flexibility. They provide easy and convenient access to credit for working-class professionals. They also ensure that individuals with subprime credit scores or those employed with unlisted companies get access to credit."
Effortless Tax Filing
All individual taxpayers, barring those above 80 years, must file their income tax returns (ITRs) online to make the entire ecosystem fast and efficient. Accordingly, the Income Tax department has introduced an auto-fill feature for filling in ITR forms. These forms require your details (name, address, etc.) and financial data - vital information like TDS deduction as listed in 26AS. When you are filing ITR, make sure that the data there is correct and tallies with all relevant documents. Most of the salaried persons have to file ITR-1, and the auto-fill feature will help. But you need to check and update the information as required for hassle-free ITR filing.
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