“Chasing Digital Payments in Retail”

This is a draft of an article I’d been invited to write for a magazine:


The experience of shopping is the best part of retail, isn’t it? Shelves of attractive packaged goods; rich photographs online; the joy of home delivery (which every e-commerce ad makes sure to include).

Retail’s least desirable part, though, is the experience of actually paying for stuff. If you’ve waited in queue while the guy ahead fumbles for change, or at the petrol pump while the attendant walks all the way to the ‘card machine’, or gotten up to fetch your credit card so you can peck sixteen digits (and an OTP!) online, you know. Clearly, there are strong incentives to make this part easier – or even get rid of it.

The Holy Grail of retail payments is elusive: (a) easy to adopt for people and retailers, (b) quicker, cheaper than cash and cards, and (c) works in-store, online, at cash-on-delivery, and between retailers & suppliers. What’s taking so long, and what can we look forward to?

Well, the Japanese have long bought from their ubiquitous vending machines by scanning a bar-code on their phones, charged to their cell bill. China’s retailers, large and small, also use QR codes in the wildly popular WeChat and Alipay apps. Sweden’s Klarna made buying online from a retailer instant, by simply having customers pay them (Klarna) later instead. Uber charges your card silently so you simply walk out of a cab at your destination. Amazon’s prototype store uses cameras and artificial intelligence to identify & bill your purchases; you just leave.

This is the stuff of magic. All of it headed here.

An exploding number of stores, kiranawallas, even toll booths in glitzy cities and tatty towns accept wallets via QR codes, especially after November’s Giant Currency Crunch. Starbucks’ India app uses a bar code linked to your prepaid card. Online cab companies (Uber, Ola) also use prepaid wallets for instant payment. Online, a handful of startups are building Klarna-like experiences (including EMIs). Bajaj Electricals & Yes Bank have trialled automating supplier payments using a blockchain, the cryptographic transaction-logging ledger, bringing payment down from four days to instantaneous – something retailers are likely to explore with their suppliers.

So. What more before you confidently shop at a store with only a phone (without being embarrassed at the register?)

A payment system spans identification (“it’s definitely me”), authorization (“it’s ok to pay this guy”), and moving money (from customer account to retailer). Elements at each step limit an elegant experience.

Take identification. Scanning a QR code is fast, but you still need a specific app, linked to a wallet, and topped up. Retailers display QR codes for multiple wallets, making accounting tedious. Customers lock up money in multiple wallets because they aren’t sure which a store (online or real-world) will take. Think Europe before the euro and way less fun.

Authorizing a card payment is an elaborate process of swiping a card, dialing the network over a land line, a PIN and two paper receipts. Wallet authorization is simple because only the amount in that wallet is at risk. But you can only topup 20,000 rupees monthly (before KYC). Barely enough for bills, fees and groceries, leave alone the good stuff. Oh, and repaying instant credit? Welcome to the nightmare that is NetBanking on a payment gateway.

Finally, moving money routinely takes a day or more, winding through card networks, intermediary accounts, end-of-day NEFT transfers and excel sheets. It works, but so does driving a bullock cart down the highway.

As it turns out, in 2016 the RBI and the National Payments Corporation (NPCI) introduced solid bank-wide standards for digital payments that rival or outdo the best in the world. Yep. For real.

UPI, a digital-only payment system that makes identifying, authorizing and instantly moving money easy, if done right. That last is a big caveat, but UPI improves so many things that banks will compete to make super-simple UPI kits for retailers and startups. It works across banks, like sending an SMS from Airtel to Idea (wallets can’t interoperate – think WhatsApp to Hike). UPI IDs can also be displayed as QR codes in-store, as buttons in-app, and even just typed into a UPI payment app – most bank apps, or Flipkart’s PhonePe, or NPCI’s BHIM (send me $$ at rahulgaitonde@ybl, people!) You authorize with a PIN set once (unlike waiting for an OTP). UPI’ll get standing instructions in a few weeks, for truly silent payments (you set limits for specific retailers though). Finally, UPI moves money via India’s Immediate Payment System, IMPS. At typically under 5 seconds, immediate is right.

Now that (1) most retailers and customers have smartphones (2) mobile data speeds have improved manifold and (3) one doesn’t need to build around hobbled payment instruments, the ecosystem is free to experiment. Wave and pay with one ID, at the register, at delivery and in-app without picking one of a dozen ways. Pay back credit automatically, without paper and signatures. Make automated, instant, paperless, trackable supplier payments.

And hey, simple payments means undiluted shopping pleasure, no? It’s going to be a fun next couple of years!