How Technology is Revolutionizing Microfinance Lending?

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 Back in the day, grandparents would give us pocket money for our expenses, and our parents would carefully monitor every purchase, ensuring we spent wisely. Fast forward to today, imagine a system that empowers parents to oversee their children’s purchases with pre-set spending limits.That’s UPI Circle for you.Now, let’s consider another scenario. You’re an entrepreneur looking to grant your staff the flexibility to manage administrative expenses while maintaining oversight of the accounts.With the <a href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> Circle feature, you can do just that.The possibilities are endless—these are just a couple of ways UPI Circle can transform how you manage and monitor expenses effortlessly.Let’s explore the transformative potential of UPI Circle, from its functionality and benefits to its impact on both banks and users. Before that, what’s <a href="https://www.linkedin.com/posts/m2pfintech_upi-circle-activity-7288514156675117056-TB6t?utm_source=share&amp;utm_medium=member_desktop">UPI circle</a> in its true essence.<h2>What is UPI Circle?</h2>UPI Circle, introduced by NPCI, enhances digital payment accessibility by allowing primary users to add family members or friends as secondary users. The secondary users can make transactions using the primary user&#39;s bank account, within predefined limits. This feature is designed to offer UPI access to individuals who may not have their own bank accounts or are reluctant to use digital payments, making it easier for them to engage in the digital economy.<h2>Why the UPI Circle Initiative?</h2>UPI Circle streamlines access to digital payments and simplifies the adoption of formal banking systems for millions of unbanked individuals. This innovation not only promotes financial literacy but also opens doors to new economic opportunities for underserved communities. UPI Circle’s impact goes far beyond convenience—it’s a catalyst for accelerating India’s financial inclusion<h2>How does UPI Circle Work?</h2>The UPI Circle enables a primary UPI user to delegate transaction authority to a trusted secondary user. This delegation can be customized as partial or full, based on the primary user’s preferences and requirements. It is especially beneficial for the elderly, differently abled, or those who need support in managing their finances. 
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 <h3>Full Delegation</h3>This mode allows the primary user to assign a monthly transaction limit of up to ₹15,000 to the secondary user. Within this limit, the secondary user can independently make payments, with a maximum cap of ₹5,000 per transaction. It enables the secondary user to transact freely within the set boundaries.<h3>Partial Delegation</h3>In this mode, the secondary user must seek the primary user’s approval for every payment request. Unlike full delegation, the secondary user cannot complete transactions independently, providing the primary user with tighter control over each payment.<h2>Benefits of UPI Circle</h2><ul class="list-bullet"><li
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 >Enhanced Control: Primary users can set spending limits and approve transactions, ensuring better control and oversight.</li><li
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 >Transaction Transparency: Allows primary users to have complete visibility into transactions made by secondary users, ensuring full transparency.</li><li
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 >Customizable Permissions: Allows to set specific rules and parameters for secondary users, making it perfect for use cases such as parental oversight on children&#39;s spending or managing business expenses.</li><li
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 >Financial Inclusion: Makes digital payments accessible to underserved populations, helping integrate unbanked individuals into the financial system.</li></ul><h2>Use Cases of UPI Circle</h2><ul class="list-bullet"><li
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 >For Senior Citizens: Simplifies digital payments by letting trusted family members handle transactions, easing the burden of navigating complex systems.</li><li
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 >For Students: Offers quick, controlled access to funds, providing peace of mind for both students and parents managing expenses.</li><li
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 >For Families: Facilitates collaborative management of household expenses, ensuring smooth operations and promoting financial literacy among younger members.</li></ul>Just as UPI Circle simplifies the payment experience for individuals and families, businesses also require seamless, scalable, and secure solutions for their UPI programs.This is where <a href="https://m2pfintech.com/upi/">M2P’s UPI stack</a> comes in.M2P’s UPI StackOur cloud-native full-stack UPI platform is a fully regulatory compliant solution that empowers financial institutions of all sizes to seamlessly launch and scale UPI programs within a unified stack. We enable businesses to accelerate go-to-market efforts, reduce operational costs, and improve transaction security with our customizable stack. Our solution is built for unmatched efficiency with<ul class="list-bullet"><li
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 >Modular architecture</li></ul>Are you ready to implement UPI circle?<a href="https://m2pfintech.com/contact-us/?activeKey=1">Get in touch</a> with us today.<a href="https://m2pfintech.com/newsletter/" rel="noopener noreferrer" target="_blank">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/" rel="noopener noreferrer" target="_blank">LinkedIn</a> and <a href="https://twitter.com/m2pfintech" rel="noopener noreferrer" target="_blank">Twitter</a> for insightful fintech bytes curated for curious minds like you.

UPI Circle: Revolutionizing Financial Accessibility for All

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 Clocking a record high of <a href="https://www.npci.org.in/what-we-do/upi/product-statistics" rel="noopener noreferrer" target="_blank">9.96 billion transactions in July 2023,</a> <a href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/" rel="noopener noreferrer" target="_blank">UPI</a> has redefined the way people and businesses transact in India. But this digital payments gamechanger relies on an internet connection to function, as transactions require seamless and uninterrupted communication between a host of payment players.A QR payment flow begins with the customer scanning a QR code for the required amount. The customer-merchant Payment Service Provider (PSP) takes charge of the approval process through National Payments Corporation of India (NPCI), swiftly debiting the money from the issuer bank and crediting it to the merchant&#39;s acquiring bank in under 60 seconds. This intricate communication among numerous servers requires a strong network connection. In network-scarce regions of India, digital transactions remain a challenge for the masses. Internet and system downtime are common not just in rural areas, but also in spaces such as building basements and network-congested nooks in cities. Network inaccessibility keeps a large section of the population out of the ambit of digital payments and is a challenge to financial inclusion. Fortunately, there’s a light at the end of this tunnel! <h2>Offline Payments, Now a Reality</h2>Offline payments, as the name implies, enable consumers to make <a href="https://m2pfintech.com/blog/the-rise-of-digital-payments/" rel="noopener noreferrer" target="_blank">digital payments</a> in an offline environment. It provides the convenience of completing a transaction in a highly secure and compliant environment, in both network-congested areas and in the absence of internet connectivity. This also includes small ticket transactions. Nearly seven out of ten UPI transactions are valued under Rs 500. Owing to this pattern, the <a href="https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12531&amp;Mode=0" rel="noopener noreferrer" target="_blank">Reserve Bank of India (RBI)</a> issued a framework enhancing transaction limits for small-value digital payments in offline mode. This is a key step in accelerating <a href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/" rel="noopener noreferrer" target="_blank">financial inclusion</a> and digital penetration among the masses.<h3>Key Highlights - RBI Offline Payments Framework</h3><ul class="list-bullet"><li
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 >Offline payments can be done in proximity (face-to-face) mode only, via any channel or instruments such as cards, wallets, mobile devices, etc. </li><li
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 >Transactions can be made up to a limit of ₹500 per transaction (previously it was ₹200) and an overall limit of ₹2000 until the balance in the account is replenished.  </li><li
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 >The balance replenishment can be done online only with AFA (Additional Factor of Authentication) </li></ul>Offline payments are expected to create a level playing field for people from all sections of society while increasing <a href="https://m2pfintech.com/blog/why-payments-interoperability-is-a-must-for-todays-generation/" rel="noopener noreferrer" target="_blank">interoperability</a> among multiple stakeholders involved in a payment cycle.  <h2>Presenting OfflinePay </h2>To facilitate digital adoption in small/remote areas with poor internet connectivity, <a href="https://m2pfintech.com/" rel="noopener noreferrer" target="_blank">M2P Fintech</a> worked with HDFC Bank, IDFC Bank, and Crunchfish to develop ‘OfflinePay’, an end-to-end digital payment solution. This innovative platform enables users to make seamless transactions with individuals or merchants even in the absence of an internet connection. It serves as a true lifesaver, especially during moments when online payments encounter technical issues or in regions plagued by inadequate internet or telecom connectivity—particularly in semi-urban and rural areas of India. <h3>Benefits of OfflinePay</h3><ul class="list-bullet"><li
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 >Enables consumers to make merchant payments digitally in areas with no or limited internet availability  </li><li
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 >Reduces load on the <a href="https://m2pfintech.com/blog/unlock-the-future-of-banking-with-next-gen-core-banking-solutions/" rel="noopener noreferrer" target="_blank">Core Banking System (CBS)</a> in banks </li><li
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 >Allows both P2P and P2M transactions in a completely secure environment</li></ul><h2>How does OfflinePay Work? </h2>OfflinePay is a next-gen prepaid wallet that works in tandem with M2P&#39;s acquiring stack to enable offline payments in a secure environment. The on-device prepaid wallet allows initiating a transaction, and the acquiring stack helps in transaction processing once the merchant or user goes online.  The M2P issuance prepaid wallet system is used to manage user-level wallets, accounts, balances, transactions, etc. For each backend wallet, an on-device wallet is created on the user application, which mirrors the backend issuance wallet. Crunchfish SDK is used for on-device wallet functionality. The on-device wallet is extremely secure, and the integrity of the wallet and transactions is constantly maintained. 
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 <h2>6 Steps to Transact using OfflinePay</h2>Step 1: Install the wallet app &amp; register via SIM binding flow <ul class="list-bullet"><li
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 >Open the app and follow the on-screen instructions to register using the SIM binding flow. </li><li
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 >Provide the necessary details, including your mobile number and any other required information. </li><li
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 >After activation, you can start using your wallet to make payments. </li></ul>Step 2: Load money into the wallet <ul class="list-bullet"><li
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 >Load money into your wallet using the available payment options provided in the app without requiring an internet connection. </li><li
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 >Note that the maximum amount you can load is Rs. 2000, as per RBI&#39;s Offline Payments Guidelines. </li></ul>Step 3: Initiate a payment by generating QR  You have two options to initiate a payment. a) Visit a partner merchant<ul class="list-bullet"><li
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 >Go to any partner merchant that supports offline payments. </li><li
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 >Request a QR code from the merchant for your payment transaction. </li></ul> b) Pay fellow users<ul class="list-bullet"><li
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 >If the other person also has an offline payment app, you can request a <a href="https://www.adobe.com/express/feature/image/qr-code-generator">QR code</a> through your respective applications. </li><li
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 >Once you have requested a QR code, the receiver or beneficiary will generate it on their app. </li></ul>The beneficiary enters the desired amount to be accepted, following the RBI&#39;s Offline Payments Standards.  The QR code is now ready for scanning. Step 4: Complete the payment <ul class="list-bullet"><li
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 >Open your wallet app and scan the generated QR code using your phone&#39;s camera. </li><li
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 >Enter your wallet PIN to authorize and complete the transaction. </li><li
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 >The payment is now successfully made, and a payment receipt/proof QR is generated on your app. </li></ul>Step 5: Payment receipt for merchant <ul class="list-bullet"><li
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 >The payment flow is completed when the merchant scans the payment receipt on their app. </li><li
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 >Both the user and the merchant now have proof of the offline payment. </li></ul>Step 6: Synchronization and payouts <ul class="list-bullet"><li
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 >When the user or merchant goes online (which could be once a day), the app synchronizes with the issuing and acquiring systems. </li><li
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 >Merchants will receive payouts for the accepted and synced transactions. </li><li
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 >Both parties can view their transaction history and balances. </li></ul>OfflinePay revolutionizes digital transactions in tiers 3, 4, and 5, as well as remote areas, by enabling smooth transactions of up to 200 INR via our merchant and client applications. We have successfully completed the pilot phase and are now eagerly awaiting further instructions from the RBI to proceed with the next steps. <h2>Benefits to Banks, Merchants &amp; Consumers </h2><ul class="list-bullet"><li
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 >Banks can use OfflinePay to declutter the congestion incurred on the <a href="https://m2pfintech.com/blog/future-of-core-banking-systems/" rel="noopener noreferrer" target="_blank">core banking system</a> due to higher volumes of UPI payments. This helps banks tap into the rural economy, provide credit, improve engagement with both consumers and merchants and enhance digital payments in small and remote areas. </li><li
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 >Merchants can use OfflinePay to increase payment acceptance, get instant payment confirmation, reduce the chance of transaction failure, simplify reconciliation and accountability, and increase security via two-way payment verification even when offline.   </li><li
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 >Consumers can use OfflinePay to transact in low or no-network zones/areas and minimize the risk of payment failures and double deductions, access dedicated dispute resolution, and use an app for convenient access. </li></ul>Our acquiring stack is the backbone of our merchant acceptance. M2P’s merchant acquiring stack has capabilities such as merchant onboarding and management, payment processing (network/non-network), configuring payment methods, defining commissions/charges, handling settlements, disputes, chargebacks, refunds, and so on. We also support EMI, subventions, extensive billing schemes, payment links, QR, and other features. Our next-gen prepaid wallet helps you launch your own customizable program designed specifically for your clients&#39; needs. With a diverse selection of cards to choose from—including gift, corporate, <a href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/" rel="noopener noreferrer" target="_blank">cross-border remittance,</a> travel, <a href="https://m2pfintech.com/blog/optimize-fleet-payments-through-fintech-innovations/" rel="noopener noreferrer" target="_blank">fleet,</a> and more—you can ensure seamless payment experiences for all. Unlock the potential of customization and offer your clients an unparalleled level of convenience and satisfaction. <h2>Enabling Offline P2P &amp; P2M Payments  </h2>Developments in offline payments like <a href="https://m2pfintech.com/blog/nfc-payments-simplifying-payment-space/" rel="noopener noreferrer" target="_blank">Near Field Communication (NFC)</a> and Quick Response (QR) codes are becoming increasingly popular in offline payments and are being used in a variety of settings, including retail stores, public transportation, and vending machines. This is particularly useful in situations where both parties don&#39;t have access to the internet or when the internet connection is unreliable. Peer-to-peer (P2P) offline digital payments are a type of digital payment that allows two parties to make payments directly to each other without the need for a third party, such as a bank or a credit card company. Our solution, ‘OfflinePay’ allows P2P transactions to be processed and settled once an internet connection is established. Overall, offline P2P transactions are becoming more accessible and convenient for users. Here are some examples of offline P2P digital payments from across the globe.<ul class="list-bullet"><li
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 >UPI123Pay is a new framework introduced by the RBI that allows users to make offline digital payments using feature phones. </li><li
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 >M-Pesa is a mobile money service that allows users to send and receive money using their mobile phones. M-Pesa is widely used in Kenya and Tanzania. </li><li
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 >WeChat Pay is a mobile payment service that allows users to make payments using their smartphones. WeChat Pay is widely used in China. </li><li
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 >PayPal is an online payment service that allows users to send and receive money using their email addresses. PayPal is widely used in the United States and Europe. </li></ul>P2M (Peer-to-merchant) offline payments are also done by using a QR code or an NFC tag. Here are some of the advantages of P2M offline payments.<ul class="list-bullet"><li
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 >Convenience: P2M offline payments can be made quickly and easily, even without an internet connection. </li><li
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 >Security: P2M offline payments are more secure than cash payments, as they do not require the merchant to handle cash.  </li><li
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 >Flexibility: P2M offline payments can be made using a variety of methods, including QR codes, NFC tags, and contactless payments. </li></ul>These advancements are making offline digital payments a more viable option for consumers and businesses alike. At the forefront of this evolution is our solution, tailored to embrace these innovations by providing a secure and reliable wallet to store digital funds. We also empower merchants with the convenience of instant credit confirmation through a reverse QR scan. As technology continues to develop, we can expect to see even more advancements in offline payments, which can help promote hassle-free financial inclusion in India. It ensures that an internet connection isn’t a prerequisite for digital transactions. Want to leverage the power of offline payments? <a href="https://m2pfintech.com/contact-us/">Get in touch</a> with our experts today. <a href="https://m2pfintech.com/newsletter/" rel="noopener noreferrer" target="_blank">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/" rel="noopener noreferrer" target="_blank">LinkedIn</a> and <a href="https://twitter.com/m2pfintech" rel="noopener noreferrer" target="_blank">X</a> for insightful fintech bytes curated for curious minds like you.

Offline Digital Payments: Boosting Financial Inclusion in India

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 India&#39;s digital lending market recorded a 132% CAGR between 2017 and 2022 and is expected to reach 350 billion dollars in value by 2023. The upswing in the number of consumers using digital avenues for banking proliferated digital loans by 40 to 60%.In today&#39;s lending landscape, credit underwriting is fundamental and pivotal in gauging the credibility of the borrower. Assessing credit risk remains the top priority for lenders as it determines the viability and profitability of the business. It helps lenders assess if the borrower can pay back a loan. Although the way lenders evaluate their applicants may vary across products, the basic framework is the same.In this article, let&#39;s focus on credit underwriting and how alternate data sources can change the dynamics of the process. <h2 style="text-align: justify;">What is Credit Underwriting?</h2>Credit underwriting is a systematic risk assessment method performed to appraise the creditworthiness of a loan or insurance policy applicant. It is a crucial function of banks, NBFCs, and other Financial Institutions (FIs) in the lending business as it helps measure the applicant or borrower&#39;s risk profile.Traditionally, Financial Institutions utilize credit reports generated by manually examining customers&#39; financial data from credit applications, credit bureaus (CIBIL), and lender databases. The metrics used to evaluate credit include the source of income, age, number of dependents, bank statements, repayment capacity, past and current debts, health, nature of employment, and other assets.It is essential to note that some loans require an in-depth review of primary data like income and current debt. In contrast, others involve a comprehensive analysis of the applicant&#39;s financial history.<h2 style="text-align: justify;">Steps in Credit Underwriting</h2>The credit appraisal process differs from product to product and also based on the lender type. Here is a broad overview of the steps of credit appraisal.<ul class="list-bullet"><li
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 >Credit Processing – In this stage, the applicant fills out and submits a credit application, either in person or online. Lenders garner all necessary data such as loan details, business or individual information, and primary risk-related information for screening the applications. Each FI has a checklist to validate if all essential information is collected.</li><li
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 >Analysis and Review – The lender scrutinizes the application, analyses the accuracy of the information/documents, and determines the creditworthiness. A credit analyst checks against the RBI defaulter list, CIBIL score, POSIDEX report, and ITR. In addition, the lenders assess the overall political and economic risks and evaluate the financial stability and reliability of the applicant.</li><li
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 >Documentation – From credit application to foreclosure of impaired loan and realization of security, each level in the credit cycle is recorded. The documentation is filed in an appropriate cross-indexing system to facilitate review and follow-up. Moreover, all credit applications must be documented regardless of approval or rejection.</li><li
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 >Approval/Sanction – Each FI has predetermined guidelines on the credit approval process for each product. The credit analyst identifies and measures the credit risk against the guidelines and forwards a recommendation to the approval authorities. The approval authorities examine the request and decide whether to reject or sanction the loan. Typically, authorities deal with new credit approvals, renewals of existing credits, and modifications in the terms and conditions of previously approved credits.</li><li
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 >Credit Administration – In this stage, loan agreements are duly prepared, credit files are updated, and renewal notices are sent methodically. FIs allocate credit administration functions to a designated department or individual in credit operations, depending on the size and complexity of the credit portfolio.</li><li
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 >Disbursement – Once the loan is approved, the letter of offer comprising the disbursal amount and the terms and conditions, etc., is sent to the customer or the borrower. The borrower should duly sign the duplicate copy and return it to the FI. Upon receipt of the letter, institutions proceed with the formalities including final documentation, registration of collateral, insurance cover, and vetting of documents by a legal expert. Before funds are released the borrower must comply with pre-disbursement conditions and the loan must be approved by the relevant authorities in the financial institution.</li></ul>
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 <h2 style="text-align: justify;">Shift in the Metrics Matrix </h2>Evolution in consumer behavior and the surge in technology adoption resulted in a paradigm shift in digital credit. This made FIs switch from mainstream practices and adopt innovative approaches to render a faster and seamless borrowing experience. Further, the emergence of fintech and the evolution of Artificial Intelligence and API-enabled services broadened the bandwidth of risk assessment.  They included data points from alternative sources that genuinely contribute to determining the quality and value of the loan applications. These data points go beyond the regular financial specifics and dwell deep into customers&#39; buying/spending patterns and behaviors. Such data points obtained from non-traditional sources are known as alternative credit data.
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 <h2 style="text-align: justify;">What is Alternative Credit Data?</h2>The alternative data is a collection of information including a customer&#39;s utility, rental, insurance, other bills payment track record, employment and travel history, governmental and e-commerce transactions, and property records. The data points exhibit the customer&#39;s habits, preferences, behavior, and character that help lenders better understand an individual&#39;s financial reliability and stability.
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 <h2 style="text-align: justify;">Why Alternative Data? </h2>Over the last few years, alternative data and behavior metrics have created ripples in the financial sector. However, fintechs and other FIs are just at the tip of the untapped potential of alternative data. Utilizing the correct alternative data and metrics can significantly enhance predictive models such as risk modeling, lead scoring, and fraud detection.Drives Financial Inclusion According to a world bank report, there are 1.7 billion unbanked individuals in developing economies like India, Bangladesh, Pakistan, China, Indonesia, and Mexico. In India, lack of credit scores is the stumbling block to achieving financial inclusion. This is predominantly because most working professionals are deprived of access to financial services due to a low or non-existent credit score. Alternative data sources unlock a gamut of opportunities to empower such consumer groups with economic power. It also serves as a significant value addition to applicants and credit grantors.Alternative sources for data and metrics enable fintechs and NBFCs to tap into the unbanked and underbanked population. The alternative data sources are less susceptible to manipulation, and it serves as a source to score the applicants who are underbanked, credit invisible, or generally labeled &#39;no-hit&#39; or &#39;thin-file&#39; by traditional models. The insights from alternative data enhance credit access for such consumer groups, who are usually overlooked. For example, first-time credit card/loan applicants do not have a credit history or background that meets specific criteria. Alternative data points help FIs profile such applicants to process their credit requirements.Augments Business Alternative datasets provide a comprehensive and well-rounded picture of consumers&#39; behavior. This helps FIs make better decisions on who to target and design &amp; develop superior products to ensure a higher adoption rate and sustainability in the market. On the other hand, a more accurate assessment of a consumer&#39;s risk status ensures loans/credits are both profitable as well as low-risk. Alternative data enables FIs make the following enhancements and stay ahead of the winning curve.<ul class="list-bullet"><li
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 >Boosts business agility and market responsiveness</li><li
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 >Identify low-risk candidates for automatic loan pre-approval</li><li
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 >Offer loans and credit efficiently</li><li
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 >Eliminate high-risk applicants by having access to extensive data on risky borrowers</li></ul>Fraud Detection The key source for alternative data is digital platforms that provide information through digital automation. Artificial intelligence (AI), Machine Learning (ML), deep data analytics, and anonymous metadata can help detect anomalies in business operations or an individual&#39;s transactions. For example, using AI-enabled tools that employ alternative data, lenders can detect financial fraudsters as early as in the pre-qualification stage.<h2 style="text-align: justify;">Unlocking Value from Alternative Data</h2>Alternative data is the new oil. Before we know it, most legacy banks will join the bandwagon and include alternative data sets in their standard lending strategies. The key to capturing the value of alternative data is recognizing and analyzing the cost/benefit balance and determining the ideal blend of data sources and their impact on profitability.For more insights on credit underwriting and alternative sources write to us at <a href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>. <a href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.

Credit Underwriting - How Alternative Data Sources Help

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 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 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>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.
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 Payment system interoperability can be at domestic (national) and international levels.<h2>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-bullet"><li
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 >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>RBI’s Mandate for Domestic PPI Interoperability</h2>Governments and Central Banks are giving interoperability a significant push to accelerate cashless ecosystems. <a 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 href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> <a 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 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 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 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>Need for Interoperable Cross-Border Payments</h2>Interoperability in <a 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 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>Global Partnerships with Payment Networks</h2>A clear example of an interoperable <a 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 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 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-bullet"><li
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 >Discover Financial Services (DFS), US</li><li
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 >Union Pay International (UPI), China</li><li
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 >Royal Monetary Authority (RMA), Bhutan</li><li
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 >Mashreq Bank, UAE</li><li
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 >Lycra Network, France (in the pipeline)</li></ul><h2>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-bullet"><li
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 >Payment flexibility: 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 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
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 >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
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 >Secure payment and POS integration: Integration pushes the transaction directly to the payment terminal and eliminates manual entries, thereby enhancing security.</li><li
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 >Low operational costs: 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>Addressing Challenges — Getting it Right</h2>Getting interoperability right through open <a 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>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 href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-based <a 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 href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> services on exiting <a 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 href="https://forms.gle/kJgVoD29t2vcxtbp9" rel="noopener noreferrer" target="_blank">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/" rel="noopener noreferrer" target="_blank">LinkedIn</a> and <a href="https://twitter.com/m2pfintech" rel="noopener noreferrer" target="_blank">Twitter</a> for insightful fintech tales curated for curious minds like you.

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

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 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.
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 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 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 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-bullet"><li
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 >User downloads UPI app from play store</li><li
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 >Upon authorization, creates a profile by setting up the Virtual Payment Address (VPA), otherwise known as a UPI ID</li><li
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 >Links the bank account with UPI ID using the registered mobile number</li><li
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 >Looks up another user/merchant through their mobile number, UPI ID or QR code to initiate a transaction</li><li
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 >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. 
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 <h2 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 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 &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-bullet"><li
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 >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-bullet"><li
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 >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-bullet"><li
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 >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-bullet"><li
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 >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-bullet"><li
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 >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 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). 
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 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 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 <a href="mailto:business@m2pfintech.com" rel="noopener noreferrer" target="_blank">business@m2pfintech.com</a><a href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.

UPI - The Driver of Economic Growth and Inclusion

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 Three years into the pandemic, amidst the Omicron wave, the Indian Union Budget 2022 promises resiliency, growth momentum, and long-term sustainability measures. At a 9.2% GDP, India projected the highest growth rate among world economies. Great stat to start the budget highlights with right?<h2>Digital Focus</h2>The key focus areas of the budget were digital and technology for the next 25 years. The Finance Minister’s budget speech promoted digital and technological innovation across industries. It offered a sharp increase in public investment and capital expenditure provision that is expected to aid future growth and help businesses recover from the pandemic-induced slump.Initiatives focused on ‘accelerated growth’ for technology-led development, energy transition, and climate action while balancing the needs of an inclusive welfare society.<h2><a href="https://m2pfintech.com/blog/fintech-101-discover-the-3ws-of-fintech/">Fintech</a> Impetus</h2>For the financial services industry, this budget promises greater investments, is fintech-friendly and <a href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">pro-financial inclusion.</a>Honoring India’s 75th year of independence, the Finance Minister announced the establishment of 75 Digital Banking Units (DBUs) across 75 districts in India. This move is expected to extend <a href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion</a> and fintech services to remote areas.Initiatives are also underway to make the <a href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">cashless payments ecosystem</a> safe and seamless for consumers and businesses by enlarging digital infrastructure, boosting internet access, expanding touchpoints, and enhancing cybersecurity. The Finance Minister also stated that financial support for the digital payment ecosystem announced in the 2021–22 budget would continue in 2022–23.<h2>Other Highlights</h2>Budgetary Allocation<ul class="list-bullet"><li
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 >6.4% fiscal deficit is projected for India in FY23</li><li
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 >Revised fiscal deficit estimated at 6.9% of GDP</li><li
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 >Rs 1 lakh crore as 50-year interest-free loans allocated to states to help fund PM Gati Shakti-related investments</li><li
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 >Rs 10.68 lakh crore effective capital expenditure is expected in 2022–23, which is about 4.1% of GDP</li><li
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 >35.4% rise in outlay for capital expenditure is estimated — from Rs 4.54 lakh crore earlier to Rs 7.50 lakh crore in 2022–23</li></ul>Venture Capital Investment<ul class="list-bullet"><li
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 >Regulatory framework for Venture Capital to be reviewed by an expert committee</li></ul><a href="https://m2pfintech.com/blog/central-bank-digital-currency-cbdc-101-a-primer/">Digital Currency on Blockchain</a><ul class="list-bullet"><li
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 >Reserve Bank of India (RBI) to introduce the digital rupee using blockchain in 2022–23</li></ul>Digital Banking<ul class="list-bullet"><li
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 >Credit growth increased by Rs 5.4 lakh crore this year, the highest in several years</li></ul>Crypto Tax<ul class="list-bullet"><li
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 >Cryptocurrencies and NFT will be taxed at 30%</li></ul>So, what do you think of the budget? Let us know in the comments below.<a href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.

Key Highlights: What does Budget 2022 mean for Fintechs?

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 <a href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">Financial inclusion</a> is the key to sustainable development worldwide. In India alone, around 190 million people do not have access to banking services. This makes India the second-largest underbanked nation after China.Simple, hassle-free access to financial services helps people achieve financial freedom. Providing untethered access to salary and incentives is the road to financial independence and social security.<h2 style="text-align: justify;">A bumpy road to financial freedom</h2>People in the blue collared sector are usually excluded from the mainstream financial ecosystem as they do not have a structured way to receive salaries, save, and track their spends. Fintechs like Zenpay facilitate this financial access by offering inclusive <a href="https://m2pfintech.com/blog/future-of-payments-processing-matched-with-industry-needs/">digital payment solutions</a> such as zero-balance salary accounts, payroll cards, and gift cards. They enable blue-collared workers to digitally access salaries and incentives without any paperwork and also save, spend, and track their finances efficiently.Though Zenpay literally revolutionized the banking sector by enabling simpler, more efficient, and transparent payments, they faced key challenges in security, <a href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/">PCI-DSS compliance</a>, and infrastructure design. As more and more customers adopted digital payments, the transactions and data became highly vulnerable to malicious activities. So, Zenpay wanted a <a href="https://m2pfintech.com/blog/future-of-payments-processing-matched-with-industry-needs/">payments processing solution</a> and a token service provider to enable highly secure and seamless financial services to blue-collared workers.<h2 style="text-align: justify;">Powering card security, operations, and infrastructure</h2>M2P collaborated with Zenpay to help smoothen hurdles in card security and infrastructure. We deployed our comprehensive <a href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">PPI </a>APIs to overcome the challenges Zenpay faced. Our solution created a strong base for Zenpay to partner with VISA and NPCI (National Payments Corporation of India) and enable salary cards and gift cards.<h2 style="text-align: justify;">End-to-end tokenization</h2>Securing cardholder data through <a href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/">tokenization</a> is critical for businesses to prevent cybercrimes. However, tokenization consumes a lot of time and effort when done in-house. So, we acted as a token service provider (TSP) to manage tokenization and enabled Zenpay to focus on its core competency and manage customer retention. M2P handled the generation and issuance of payment tokens and the operation and maintenance of a token vault. We also offered PCI-DSS widgets to lower the cost for PCI assessment and the time spent on PCI compliance procedures.<h2 style="text-align: justify;">Seamless card program management</h2>Customers today prefer banking apps that are bug-free, quick to load, easy to operate with hassle-free onboarding. Choosing a program manager is critical to enable seamless operations and user experience. M2P served as a robust program manager to Zenpay and was responsible for security, quality assurance, technology integration, migration, customer engagement, reward strategies, and banking relationships. We risk proofed Zenpay’s technology infrastructure for a flawless and high-quality banking experience.<h2 style="text-align: justify;">Scaling up for 250% rise in customer base</h2>Customers expect more hyper-personalized services when it comes to digital wallets. M2P helped Zenpay ensure new customer acquisition and retention by delivering an amazing user experience. Zenpay upgraded its user experience from receiving voice notifications to image recognition.Enabling the best user experience, Zenpay expanded its customer base by more than 250% in just 10 months, with a whopping increase from 35,000 to 125,000. M2P helped Zenpay scale up by offering robust, secure, and bug-free API infrastructure.Zenpay also increased the total number of customer transactions by 47%. As a result, the transaction volume increased from 180 crore transactions to a whopping 265 crore transactions in 10 months.<blockquote>Approachable. Innovative. Solution-centric. The experience of working with M2P has been nothing short of wonderful! Superior support, fast TAT, a wide range of solutions, and most importantly, end-to-end ownership from sales to technical integration. M2P helped us grow our customer base by more than 250%.</blockquote>– Ankit Bhargava, Founder &amp; CEO, <a href="https://zenpaysolutions.com/" rel="noopener noreferrer" target="_blank">Zenpay Solutions.</a><h2 style="text-align: justify;">The buck doesn’t stop here</h2>Using M2P’s tech-stack, Zenpay plans to deepen its services and products in the future. Both the companies will collaborate to enable greater financial inclusion and freedom through services that include QR code-based payments, bill payments, UPI integration, and microloans.Are you looking to enable inclusive financial services? Need help with card infrastructure and program management?Get in touch with us at <a href="mailto:business@m2pfintech.com" rel="noopener noreferrer" target="_blank">business@m2pfintech.com</a><a href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.

How M2P helps Zenpay enable financial inclusion?

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 As technological advancements promote growth in our country, lack of financial literacy still prevails. In a recent incident, a farmer has reportedly lost his savings worth two lakhs to rats. He stored his money as cash in his house. The farmer wouldn’t have lost his savings if he was aware of a financial institution. The eradication of financial illiteracy and improving maximum financial inclusion help us overcome such situations.<h2 style="text-align: justify;">What is Financial Inclusion?</h2>Financial inclusion aims to offer primary financial products and services to all individuals and businesses and makes these services more accessible and affordable.Financial institutions aim to offer basic services that include payments, transactions, savings, credit, and insurance sustainably to drive more financial inclusion. New technological innovations in fintech have caused organizations to offer cost-effective services to their customers.<h2 style="text-align: justify;">Measures to improve Financial Inclusion</h2>The Reserve Bank of India started taking measures in 2005 to improve financial inclusion in our country. The government initiated the National Mission for Financial Inclusion (NMFI), including Pradhan Mantri Jan Dhan Yojana (PMJDY), which provides services to unserved areas.Furthermore, the “Digital India” initiative, which provides accessible digital banking services with simplified formal verifications using unique identification (Aadhaar), is also a bold move towards improving financial inclusion in the country.<h2 style="text-align: justify;">Fintechs boosting Financial Inclusion</h2>Indian fintechs are the biggest drivers of achieving financial inclusion, with an adoption rate of over 87%. In the recent decade, fintechs have widened operations to provide personalized services without opting for the traditional route. Also, the rise of the popularity of smartphones around the globe led to the establishment of new financial services.“As of February 2021, there is a record of 2.3 billion digital payment transactions made worth over 4 trillion rupees.”From Demonetization in India to the Covid-19 outbreak, people are now more interested in using financial services such as digital payments, lending solutions, etc. Digital financial services help many small and medium-income businesses to offer cashless payments option to their customers.<blockquote>According to an annual report for FY 2020–2021 by RBI, the volume of digital payments is at 453 crores in India.</blockquote>With increasing ideas and innovations, fintechs ensure more inclusion. With the growth in the industry, a wide range of products and services are set to enter the market to offer customized services. Products such as<a href="https://m2pfintech.com/blog/the-rise-of-digital-payments/"> digital payments</a>, digital credit, <a href="https://m2pfintech.com/blog/neo-banking-101-all-you-need-to-know/">neo banking</a>, <a href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API banking</a>, <a href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid cards,</a> etc., have established effective financial inclusion.<h2 style="text-align: justify;">What challenges do we face?</h2><ul class="list-bullet"><li
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 >The excluded sections, such as rural, poor areas, often don’t have access to a financial institution and often approach moneylenders.</li><li
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 >A constant need to improve financial literacy as many rural people have less or no awareness of financial institutions.</li><li
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 >Even though people have a financial account, most users still prefer cash. Lack of trust and reliability prevents a customer from accessing the available financial services.</li><li
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 >Low-income levels indulge in a myth that financial institutions only offer services to high and middle-income groups.</li><li
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 >Some people are uncomfortable due to language barriers, formal documents, and the formalities that we go through before a financial transaction occurs.</li></ul><h2 style="text-align: justify;">Overcoming the Challenges</h2>To alleviate the challenges faced by consumers, there arose a need to innovate new and simplified products. New technologies, fintech innovations, and the digital finance revolution have now become the constant drivers of financial inclusion. There is a constant growth in the sections of digital finance over traditional finance methods.<blockquote>Digital Financial Inclusion ensures that the excluded and unserved population has digital access to financial services.</blockquote>Digital services focus on affordability, customer satisfaction, and sustainability. New digital platforms run by the institutions now accommodate small levels of cash flow. These services allow the low sections to make transactions, thus preventing the use of informal services.Understanding the potential and risks such as operational risks, financial crime risks, etc., while improving digital services can contribute to the growth of digital financial inclusion. Similarly, technological innovations have increased financial inclusion. These innovations aim to regain customers’ trust, rectify geographic and accessibility issues to bring in new consumers.Information technology, smartphone-enabled services have reduced the need for physical banks. With technological development, we can develop a rural information infrastructure that provides financial services to the underserved.Fintechs have also played a significant developmental role in achieving greater financial inclusion. Fintechs acts as a catalyst for financial inclusion as it creates more opportunities for the unbanked population. The shift of digital transactions from traditional transactions has improved self-employment, rural entrepreneurs, small borrowers, mediums, and enterprises.Lack of financial awareness, high cost of traditional services, and other policy gaps were significant challenges while achieving financial inclusion. Fintech startups play a critical role in overcoming these challenges in the economic landscape.The tremendous growth in fintech has shown a positive shift as a report shows that 99.5% of consumers are now aware that they can transfer money and make payments with fintech platforms.<h2 style="text-align: justify;">Fintech products driving inclusion</h2>New fintech products have helped consistently in driving the financial inclusion of the country. As discussed earlier, these products allow the work of financial services and offer a streamlined process. These fintech products applied to reality are the main drivers of financial inclusion.<h3 style="text-align: justify;">Embedded Credit</h3><a href="https://m2pfintech.com/blog/beginners-guide-to-embedded-lending/">Embedded credit</a> focuses upon integrating ‘lending as a feature’ in digital platforms. Customers receive their credit with the involvement of a familiar interface and eradicate the need for a third-party site.Micro, small and medium enterprises (MSMEs) face difficulty offering small credits, increasing demand here.The B2B e-commerce marketplaces provide the ultimate <a href="https://m2pfintech.com/blog/factors-and-psychology-behind-the-great-bnpl-allure/">BNPL (Buy Now, Pay Later)</a> option for the retailers while they checkout. BNPL offers these MSMEs to purchase on credit and pay later. BNPL is one of the fast-growing payment options which also helps MSMEs to expand their business. The BNPL would account for 3% of the global e-commerce spend by 2023. Thus, this system provides a convenient platform for consumers to experience new market products.<h3 style="text-align: justify;">Digital Payments</h3><a href="https://m2pfintech.com/blog/the-rise-of-digital-payments/">Digital payments</a> (also called electronic payments) are the method we transfer one point value from one account to another using a digital device. Digital payments are end-to-end digital transactions, and also, they don’t require the usage of physical cards, thus reducing costs.For example, the latest introduction of <a href="https://m2pfintech.com/blog/e-rupi-indias-digital-upgrade-for-the-underbanked/">e-RUPI</a> which is a digital payment solution created by the Government of India to allow cashless payments. e-RUPI is powered by the National Payments Corporation of India (NPCI), and the one-time payment mechanism is easy, highly secure, and entirely confidential. The distributions are also made easy, safe, and contactless.<h3 style="text-align: justify;">Neobanking</h3>Neobanking is an innovative method of approach in which financial institutions offer services without physical presence. <a href="https://m2pfintech.com/blog/top-14-neo-banks-that-reinvent-banking-experience-in-india/">Neo banks in India</a> operate on a low-cost model with minimal to zero monthly fees on deposits and withdrawals, and rock-bottom balance requirements. These drivers bring consumers and businesses across income levels into the fintech fold, fostering financial inclusion. Neo banking is highly famous among the millennials and Gen Z as they no longer use outdated processes. Neo banks use Artificial intelligence and machine learning to create a customer-centric Banking experience, with the aim to reduce human dependence. Neo banks provide millennials and Gen Z their own customized product set, making the process fuss-free. Millennials and Gen Z prefer simplified and easy- manageable finances, thus proving neo banks are a blessing in disguise.<a href="https://m2pfintech.com/blog/7-steps-to-start-a-neo-bank-from-scratch/"> Curious to know how you can start a neo bank? Check out these 7 steps. </a><h3 style="text-align: justify;">API Banking</h3><a href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API Banking</a> provides better means to share data, helps in integrating systems, and makes services more personalized. In API banking, tailor-made products improve the overall customer experience.With the help of API banking, new fintech innovated products offer features and services aligned to provide flexible services. Innovations in API banking have reduced costs and now made it economical for the unbanked and underserved as they can now experience better products and services.<h3 style="text-align: justify;">Open Banking</h3>To offer better services, open banking offers third-party financial service providers access to financial data with the help of APIs. <a href="https://m2pfintech.com/blog/open-banking-a-primer-2/">Open banking</a> is highly prevalent in Europe. Open banks help achieve more financial inclusion as it allows small, medium businesses access particular tools and services that target the needs of their consumers. Innovations in open banking and the experimentation of products can foster higher financial inclusion in the long run.<h3 style="text-align: justify;">Prepaid Cards</h3><a href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">Prepaid cards</a> help us process payments quickly as we have better cash flow management, easy reimbursements, and more security than cash or cheques. They are a super alternative to carrying cash around. They are available as gift cards, meal cards, and also as travel cards. Prepaid cards are a great way to control business expenses, improve efficiencies and generate revenue streams.  However, the time, cost and effort involved in card issuance in-house are huge.The best way to manage card issuance is by <a href="https://m2pfintech.com/blog/why-should-apis-be-your-holy-grail-for-prepaid-card-issuance/">deploying the right APIs.</a><h3 style="text-align: justify;">Mobile Wallets</h3><a href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">Mobile wallets</a> are famous and convenient due to their accessibility. Transactions are made easy as we can send, receive and store money easily with the help of our smartphones. In reality, right from a vegetable vendor to corporate and digital firms, every one of us can easily transact if we have a mobile wallet.Mobile wallets ensure that every person can participate in a financial transaction with its cashless and contactless technologies. The whole process boosts the economy while achieving more financial inclusion.The future ideas of the fintech industry will result in product innovations while improving existing ones, thereby offering more affordable and accessible services to both the unbanked and underbanked. Furthermore, the coupling of fintech and financial institutions will help eradicate financial illiteracy and promote financial inclusion. With the acceleration of fintech and its budding ideas, the future of financial inclusion is bright and holds many opportunities that come with new beginnings.Need more info on how fintech can help you? Write to us at <a href="mailto:business@m2pfintech.com" rel="noopener noreferrer" target="_blank">business@m2pfintech.com</a>.<a href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on <a href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.

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