MMID from NPCI, can it become India’s payment panacea?

MMID based interbank mobile payment system has huge promise in India. A country that is witnessing a payments revolution led by both start-ups, private banks, telcos as well as government backed National Payment council of India. NPCI has a payment gateway called Rupay which has one of the lowest interchange and transaction processing rates in the world. But whats most exciting is the Mobile payment platform. Mobile money identifier (MMID) is an authentication id that was initially used to offer mobile based interbank mobile payment system but now extends beyond it. You can use it to transfer money to a bank account to a person who doesn't have MMID, by using another system widely in use for online payments - NEFT. Back in August, 2013 the team @ Lets Talk Payments had written about MMID, IMPS and its rise and usage in India. If we look at the numbers today, MMID has started showing its true colors. You can refer to the recent numbers posted by NPCI here.

Statistics as they say tells you only half the story. While lot of bloggers say that IMPS numbers look low, payment experts believe its just the beginning and it has the potential to grow to epic proportions. Stats indicate that cumulative number of transactions have grown from 700,000 to over a million in 2 months time. Though there has been an addition of only a single bank in over 2 months but more than 50 banks are already onboard. Top 3 leading MMID issuers include ICICI Bank, Axis Bank and SBI. During this phase 94.7 Mn MMID’s have been issued (that is more than population of several countries) and the total transaction numbers have gone up by around 400,000. If we do the math, the issuance to usage rate in the period of these 2 months has been less than 0.5% but the transaction value is growing.

Have a look at the updated transaction value chart compiled by our team for reference:

Data Source: NPCI

Some of the recent developments which could help fuel the growth story of IMPS include:

  1. Merchants, Government agencies and payment companies, like SpiceJet, IRCTC, Dish TV, Paytm, and others are offering IMPS service to their customers for billing. Payment enthusiasts are excited - it could be seen as one of the biggest mobile wallet program, where wallet is linked to bank account that enables payments at merchants. But the usage is low, and nobody is aware of it. IMPS has just put its feet inside the door.
  2. According to NPCI, currently the IMPS transfers are channelized through NEFT. The transactions are processed and settled in batches. This should help in the growth of MMID usage. Now that any of the NEFT and MMID mode can be used at the two ends to transfer funds, the usage should grow.
  3. Earlier in October, 2013 UIDAI tied up with IMPS to offer domestic remittance services. The service is set to go live in the coming months. Banks can leverage NPCI AEPS interface for UIDAI authentication.
  4. Most of the Mobile banking apps these days include (or going to) IMPS and MMID as a standard feature. Banks like Kotak Mahindra Bank, Lakshmi Villas Bank, etc., have built apps for their account holders to use IMPS services within it.
  5. From anonymous sources we understand some companies might be looking at building applications on top of this platform to provide payment services with great user experience

Some of the reasons which may impact the adoption rate of IMPS service in short term include:

  1. Lack of awareness – The banks that have enabled MMID service are not promoting and advertising it enough amongst its customer base. There is still a large population in India, who are not aware of what IMPS, MMID service does and how it works. History has it that no payment system in the world has got mass adoption without tremendous marketing efforts. It might come as a surprise to many, but mPesa services had millions of dollars spent to promote it. The customers who have got their MMID’s through their respective banks are not sure where and in what situations it works.
  2. Complex sign up experience – Signing up for an MMID service may not be too complex but the perception about it is. Some of the banks send out MPIN’s through snail mail, where a user may have to wait for a week to get an MPIN. The mobile banking apps integrating IMPS service is a solution to this problem but mass adoption of apps in a country like India is a question there.
  3. Multiple PIN’s – MMID numbers are long. A typical user today has to remember the MMID number, MPIN, even IPIN (Internet Banking Service) and the regular PIN for ATM based transactions. Remembering all the PIN’s may not be convenient in comparison to using cash, debit / credit card for transactions.

LTP view: In countries like USA, carriers/banks/tech firms and startups are competing against each other and leading to fragmentation in the market. But can developing countries afford such scenario? Do we have companies that are innovating from scratch for India? While India might or might not be able to replicate the success of mPesa but one thing it can learn from it is that there is a merit in coming together and supporting/promoting a national program like IMPS's MMID. We don't need an ISIS versus google wallet versus Paypal beacons situation, or do we?

Updated: 6:30AM EST.