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Smartphones boost digital payments

News, 25 January 2017

NEW DELHI: The growing penetration of smartphones across India, combined with demonetisation, is likely to accelerate a shift to digital payments and boost m-commerce, a new report says.

According to intelligence firm Ken Research, digital payments can contribute to the growth of financial inclusion if these are as easy to access, convenient and secure as cash. It identified the driving factors as smartphone penetration, internet access and the development of a digital payments infrastructure.

On the first of these, India's smartphone user base now exceeds 300m, and figures from Counterpoint Research suggest the market is growing at 18% a year, thanks largely to the aggressive marketing and portfolio strategies of Chinese players which now account for 46% of the market.

For example, when Xiaomi launched its Redmi Note 4 model last week, it reported selling 250,000 units in 10 minutes in what it said was the "biggest smartphone sale in the history" of the country.

The country's digital infrastructure, however, remains underdeveloped, with only 15 out of 100 households having access to the internet, according to Networked Readiness Index 2016, a World Economic Forum report which also indicated that there are only 5.5 mobile broadband subscriptions for every 100 people.

Writing in Mint, Kanchan Samtani and Sumit Sarawgi, partners and directors at BCG, observed that there are significant economic barriers to advancing this, with mobile operators deterred from network investments, for example, by low tariffs and high competition.

They urged a combination of "public-private funding, progressive government policies and freeing up of spectrum assets" to address the country's digital divide.

If smartphones and digital infrastructure are the future, demonetisation is now and this has given an immediate boost to non-cash and digital payments.

Ken Research recommended that card providers should promote card adoption and use through merchant partnerships, reward programs, and benefits on day-to-day spending as well as educating consumers about the advantages of using payment cards over cash.

Data sourced from Ken Research, Economic Times, Mashable, Mint; additional content by Warc staff