The last few years have seen the Indian economy heading towards the digital way. For a nation where in the past payments were predominantly made in cash, today a growing segment are using digital transactions including card payments, digital wallets, UPI et al. An increasing number of people are seen to prefer the use of card-based payments. This is true among people of all age groups across the lengths and breaths of the country.
As per latest available data from RBI, the month of October 2020 saw a whopping INR 1.3 Tn worth of transactions being carried out at Point of Sale (PoS) terminals through credit and debit cards. The fact that 874 Mn debit cards were used to make these transactions speak about the popularity of the same. The contribution of 59 Mn credit cards into these transactions cannot be ignored either. Today, India’s literacy rate is at an all-time high of 74.04%. This has been an encouraging factor to the use of credit and debit cards.
As thousands of credit and debit cards are issued every month, it is worthwhile to ponder how card transactions have evolved in the last decade. The increase in the usage of plastic money and need for greater security have driven most of the major technological advancements in this field. The last few years have seen long used magnetic stripe cards giving way to chip and pin cards. Payments made through chip and PIN cards are considered to be secure and trusted.
During this pandemic, contactless cards are rapidly emerging as the new trend in card payments. Major banks like ICICI, HDFC, SBI and Axis Bank have issued contactless cards to their customers. Government is also supporting the contactless card payments, by creating enabling regulations, and especially during this pandemic.
According to Reserve Bank of India (RBI) regulations, two-factor regulation can be done away with for contactless transactions which are less than INR 5000. According to global financial service company American Express, such transactions are completed at a 63 % faster speed compared to conventional cards. Currently, India has 5.39 Mn Point of Sale (PoS) terminals. Out of these, 1.5 million terminals accept contactless cards. In the coming years, this figure is only expected to rise.
Today, the majority of Indians have mobile phones and many of them have internet access on their devices. This trend has played a major role in fostering the growth of mobile phone based transactions in the country. Combining this with contactless card technology has led to the birth of ‘Tap and Pay’ which is a new way of making payments. Here a virtual version of the credit or debit card is created in the user’s mobile phone. The mobile phone is then tapped (instead of the plastic card) on the NFC POS terminal to make payments to the merchants. The ‘Tap and Pay’ services are not only quick and convenient, but also hygienic as they are completely contactless, hence highly relevant during the pandemic era.
Leading banks and credit card issuers in India are launching ‘Tap and Pay’ service. SBI Card, the second largest credit card issuer in India has taken the lead by launching SBI Card Pay service in October 2019. The service leverages Host Card Emulation (HCE) technology and tokenisation to deliver swift, seamless, secure and convenient contactless mobile payments to credit card users in India.
With SBI Card Pay service, customers can create a virtual version of their physical Mastercard or Visa credit card on their mobile phone and tap their mobile phone on the merchant’s NFC POS to make the payment. This service will go a long way in shortening the queues in supermarkets and providing a seamless experience for the users.
From the security point of view, the SBI Card Pay uses the latest tokenisation technique. Encryption techniques are used to generate a device-specific digital token for each credit card. Hence, while executing a transaction, a digital token is shared and the customer’s actual card information is masked, thus securing the transaction. The makers of the SBI Card Pay have taken into account all possible situations that may arise.
For example, in the event of loss of the mobile phone, and digital token being blocked, physical cards can still be used. This is done to ensure customer convenience. SBI Card Pay also comes with a host of customization options wherein users can set a sub-limit to the number of such transactions in a day and the amount of money that can be transferred in each such transaction.
IDFC FIRST Bank is another bank, which has launched a similar ‘Tap and Pay’ service in September 2020 with the name of ‘SafePay’ using HCE and tokenisation. SafePay allows customers to create a virtual version of their IDFC FIRST Bank debit card on the Bank’s mobile app and then tap their phone at NFC POS machines to make payment at merchants.
SafePay does away with the need of carrying a physical card, making payments convenient and hassle-free. More importantly, the payments are completely contactless, making them the safest option to pay merchants in the COVID-19 times. This safety and hygiene value proposition is reflected in the name of the service ‘SafePay’.
Apart from customer convenience and hygiene, there are other benefits as well. In India, the majority of card holders have chip and pin (contact) cards. Replacing them with NFC contactless cards will take a lot of time and involves cost. However, HCE technology provides an easy alternative allowing banks and card issuers to extend contactless payments to the majority of their clients in a short time. Card holders can instantly create a virtual version of their card using a mobile app and are ready to go contactless within minutes.
SBI Card and IDFC FIRST Bank are not the only ones to adopt ‘Tap and Pay’. Other major banks are on their way to launch similar HCE and tokenisation-based ‘Tap and Pay’ services. With ‘Tap and Pay’ customers are in for world-class payment experience. Such services promise frictionless digital transactions while also ensuring the utmost security and hygiene. It is expected that such digital payments initiatives will gain prominence in the future and help to build a stronger ‘Digital India’.