Shoppers need not stop: Dynamics of in-store payments is being rewritten

In March this year, Worldline India launched Vabox (Voice Alert Box): merchants will now get instant audio alerts on the settlement of UPI (Unified Payments Interface) payments via QR codes in languages of their choice when customers check out.

“They needn’t worry whether the amount has been credited to their account,” says Gulshan Pruthi, the firm’s executive vice-president.

The French payments giant will roll out 500,000 Vaboxes in the initial phase.

Its target: the country’s QR-merchant base, estimated at some 260 million. Keeping Worldline company will be MSwipe Technologies, Pine Labs and Mintoak Innovations with a slew of new-age offerings — cloud-based point-of-sale (PoS) terminal solutions with software updates, scalability, and enhanced data security to streamline the merchant on-boarding process.

The dynamics of in-store payments is being rewritten; this has implications for the fortunes of Indian retailing — the Boston Consulting Group estimates that the sector will grow to $1 trillion by 2027.

Merchant on-boarding will be of singular importance in this journey.

For what needs to be pencilled in is the skew — we have far more places to spend, relative to the pieces of plastic to swipe with — 961 million debit and 85 million credit cards in FY23.

At Palladium in Mumbai or DLF Emporio in New Delhi, the number of PoS terminals, the swipes on them, the kinds of card used, the volumes and value of transactions is far greater than at thousands of other smaller outlets.

What is playing out now is tectonic.

As of April 2023, 7.8 million PoS units had been set up in the country over two decades.

Blame this poor run-rate on the expensive one-time hardware cost of around Rs 10,000, plus monthly charges of Rs 300 or so to onboard merchants.

But there’s nothing you incur by way of investments to do so via QRs and merchant apps.

The four key catalysts in the run-up to the current situation are: Reliance Jio, which brought down the price of data (smartphones existed earlier, but data got democratised); the government’s move to knock off the merchant discount rate (MDR) on transactions of up to Rs 2,000 on the RuPay platform (it’s another matter that this affected PoS deployers); cash-backs on UPI (think Paytm, Amazon Pay, Google Pay, PhonePe or Cred); and the big boost to digital payments in the wake of the Covid-19 pandemic.

Another variable is at play. Fidelity National Information Services’ Global Payments Report 2023 projects that the share of global in-store cash settlements will fall to $6 trillion by 2026, a drop of nearly 50 per cent.

It lists three key trends highlighting the decline of cash: emerging economies are seeking to achieve financial inclusion through digital payments; the marked shift towards digital payments has solidified primarily due to the pandemic; and merchants increasingly accept mobile payments via QR codes, which are easier and cheaper.

Talking shop

Raman Khanduja, co-founder and chief executive officer of Mintoak Innovations, points to Square (developed by Jack Dorsey’s Block Inc) and its multi-mode payment acceptance — cards, phones or tablets as payment registers.

“You can do everything, from inventory management (of the store) to appointment scheduling for trips to salons and more, on the terminal,” says Khanduja, adding that “India will also see changes in the look and feel of PoS terminals”, even though this will resonate only with the bigger outlets, given the high costs of infrastructure involved.

There are early signs that this is playing out in India as well.

Mintoak, a platform that helps banks to broaden their payment offerings to merchants, helps differentiate, engage and monetise beyond payments.

At its core is an app to onboard and manage merchants.

HDFC Bank has picked up a 7.75 per cent stake in it.

Mintoak is already multi-jurisdictional — it has a footprint in Africa and West Asia.

Pine Labs has opened its doors to loyalty programmes, billing services, gift cards, lending options, and buy-now-pay-later options.

Gushes Kush Mehra, president and chief business officer at Pine Labs, on its launch of ‘Hub’ PoS devices: “These modern terminals feature a reader compatible with over 100 payment modes, an in-built printer, dual screens, software tailored to merchants’ needs, a digital EMI catalogue on the best offers, and a billing app for inventory management and order processing.”

What does all this mean for legacy PoS deployers?

“The number of PoS terminals deployed in 2022 was 7.55 million, a growth of 37 per cent year on year.

“It will continue to be an invaluable business tool for the retail business,” says Pruthi.

“If you see the world of commerce, it’s fully transformed. Merchants’ needs are fast changing, and we are trying to fix new challenges like operational efficiencies and enhanced consumer experience.”

It can aid cross-channel purchasing experiences, just as cloud PoS technology helps merchants swop customer information spanning multiple channels.

MSwipe Technologies is building a customer relationship management solution via WhatsApp, to help merchants to tackle customer queries, gather contact information, and transaction histories to boost sales.

According to MSwipe’s CEO, Ketan Patel, “the payments industry has seen a massive evolution where devices have evolved majestically.

“Box-POS terminals are becoming a tech tool for small and large businesses to streamline operations like never before.”

We are well on the way to a situation where a largely MDR-driven business is more than just payments, and is morphing into a link between large retailers and manufacturers.

That said, the temptation to go gaga over these dynamics must factor in reality: the number of micro-ATMs (devices equivalent to PoS terminals used by business correspondents of banks to authenticate customers’ transactions), at 15.59 million in February this year, was up by 83.19 per cent from a year ago, with the value of transactions at Rs 25,483 crore, up by 2.3 per cent.

And cash in circulation in FY23 amounted to Rs 33.50 trillion, or 12.26 per cent of GDP; in FY24, this is projected to be Rs 35.50 trillion, or 11.1 per cent of GDP. This is despite the successive record highs seen in UPI transactions — the month of April this year saw 8.9 billion transactions valued at Rs 14.07 trillion.

Clearly, cash is very much around.

But shoppers need not stop!

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