Retail Digital Payments. August 2017

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Clyde Webster
6 years ago
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1 Retail Digital Payments August

2 Safe Harbour Except for the historical information contained herein, statements in this release which contain words or phrases such as will, aim, will likely result, would, believe, may, expect, will continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, strategy, philosophy, project, should, will pursue and similar expressions or variations of such expressions may constitute "forward-looking statements". These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to our ability to successfully implement our strategy, future levels of non-performing loans, our growth and expansion, the adequacy of our allowance for credit losses, our provisioning policies, technological changes, investment income, cash flow projections, our exposure to market risks as well as other risks. Axis Bank Limited undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. 2

3 Digital Payments in India Digital Payments at Axis Bank 3

4 As the Indian economy becomes more digital People Mobile Phone Users Internet Users Smartphone Users #2 in the world #2 in the world #2 in the world #2 in the world ,250 mn 1,000 mn 300 mn 240 mn ,350 mn 1,200 mn 650 mn 520 mn Source: BCG Google Digital Payments 2020 Report July

5 the Payments paradigm continues to evolve Past Paradigms Emerging Paradigms Deposits first, Payments offered as a by-product Payments an entry point, to broaden banking relationship Credentials: Proprietary (Card + PIN both managed by bank) Credentials: Public (Mobile Phone + Aadhar Authentication) Transactions: Low Volume, High Value Transactions: High Volume, Low Value 5

6 Digital Payments growth outpacing cash Number of transactions (Mn) Card Transactions Mobile Banking CAGR 45% 3,486 CAGR 118% 977 1,140 1,423 1, FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 IMPS/UPI ATM Withdrawals (Debit Cards) CAGR 224% CAGR 12% 525 6,088 6,996 8,073 8, FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 Source: RBI Payments Systems Indicators 6

7 Driven by convergence of Government intent, Regulatory support and Technology enablement Immediate Payment Service Aadhaar Enabled Payment System National Automated Clearing House Jan Dhan Yojana Payment Banks E-sign QR Codes Unified Payments Interface Bharat Bill Payment System New schemes to promote BHIM Aadhar Pay Govt. receipts beyond a limit 2 million Aadhar based POS Payments Regulatory Board Demonetisation Tax benefits for noncash transactions Bharat Interface for Money Duty Exemption on POS devices No cash transactions above `200,000 7

Demonetisation has provided a further fillip to the already growing Digital Payments Credit/Debit Card POS Pre Demonetization 203 229 332 Post Demonetization Number of transactions (in Mn), unless

8X Mobile Wallet Transactions 75 100 138 213 262 247 307 321 242 222 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 3.

8 Demonetisation has provided a further fillip to the already growing Digital Payments Credit/Debit Card POS Pre Demonetization Post Demonetization Number of transactions (in Mn), unless otherwise specified Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Growth in Txn Jun 17 Over Sep X Mobile Wallet Transactions Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun X IMPS and NEFT transactions Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun X UPI Transactions Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 # of PoS machines (Base in Mn) Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun X Source: RBI 8

Still significant opportunity for Digital Payments growth ATM Withdrawals/ POS Transactions (Count) x, As of March 2016 0.2 0.9 1.2 1.3 1.

9 Still significant opportunity for Digital Payments growth ATM Withdrawals/ POS Transactions (Count) x, As of March The Journey has already started FY15 FY16 FY17 Jun ~$370 Bn of currency was withdrawn from ATMs in FY17 Source: RBI, Mckinsey s Global Payments Map 9

10 Digital Payments expected to grow to $500 Bn by 2020, P2B the largest opportunity Destination Initiation Retail Person Business Government 2020 estimates in $ Bn Person Corporate 1 Business Government 17 1 Excludes large corporates and cross border payments Prominent payment flows Source: BCG Google Digital Payments 2020 Report July

11 Multiple white spaces exist in P2B payments Daily Weekly Personal Consumption Expenditure Monthly Annually Source: BCG Report : Value of Consumer payments; H High digital penetration L Low digital penetration 11

12 Small ticket, unorganized retail represents the largest P2B opportunity Projected P2B Sub Segment Share (2020) % Contribution P2M Market Bills & Utility Rent & Professional Transport Financial Services Unorganized Retail Modern Trade Restaurant & Entertainment E-Comm Organized Healthcare Source: BCG Google Digital Payments 2020 Report July

Last few years have seen multiple new entrants vying to capture share of P2B opportunity Strategic Objective Network Companies Aim to increase and retain volume of payments to generate transaction

13 Last few years have seen multiple new entrants vying to capture share of P2B opportunity Strategic Objective Network Companies Aim to increase and retain volume of payments to generate transaction revenues and scale Technology Companies Drive traffic on platform, additional customer data and payments revenue Hardware Companies Increasing sales and market share Retailers/Travel Aim to increase traffic, generate new sales and optimize cost (transaction fees) Payments Specialist/Digital Platform Become a financial marketplace/platform leveraging strength of existing platform 13

14 In the Payments transaction flow Customer Merchant Access (Mode to Connect) Authentication (Identity Check) Authorization (Value Management) Settlement (Financial Transaction) Devices/ Channels Payment Modes Card Linked Wallet Linked Account Linked Fund Transfer NEFT/RTGS/IMPS/UPI 14

Banks with a key role across the transaction flow, have an opportunity to Partner Customer Merchant 1 2 3 Access (Mode to Connect)

15 Banks with a key role across the transaction flow, have an opportunity to Partner Customer Merchant Access (Mode to Connect) Authentication (Identity Check) Authorization (Value Management) Settlement (Financial Transaction) Banks Non-Bank Fintechs Non-Bank Tech Companies 15

16 Digital Payments in India Digital Payments at Axis Bank 16

Digital Payments is core to Axis Bank s strategy Higher

Deposits and Investments Payments at the core Risk Management

investments, and insurance cross-sell 1 2 Transactions drive

as accounts which have had a user initiated transaction in last 6

withdrawal, deposits at branch, cheque (inward + outward), and

17 Digital Payments is core to Axis Bank s strategy Higher transaction active customers also retain higher balances Lending Deposits and Investments Payments at the core Risk Management Analytics on Payment data enables lending, deposits and investments, and insurance cross-sell 1 2 Transactions drive balances and consequently market shares 1 Active account defined as accounts which have had a user initiated transaction in last 6 months (as of 31 Mar 2014) 2 Total Transactions include: cash withdrawal, deposits at branch, cheque (inward + outward), and financial transactions over internet banking, mobile banking, POS machines, and ATMs / CDMs Source: BCG 17

18 We believe Digital Payments Access and Acceptance are key cogs of engagement Customer and Merchant Needs Deposits & Investments Working Capital Management Access to Funds Loans Digital Payments Access Digital Payments Acceptance, Reconciliation and Cash Management Deposits Customer Needs Merchant Needs Protection Value Added Services 18

19 We have a comprenhensive range of solutions to maximize on the Digital Payments opportunity Customer Merchant Low Cost Digital Solutions Non-Axis Bank Customer UPI Wallet Merchant App QR Code Forex Transit Offline Merchants Hardware Linked Solutions Banking App Cards POS (Enabled for Card, QR, UPI and Contactless) Mobile POS Axis Bank Customer QR Code Based HCE based Smart POS PC POS In-App Wearable Card and Application Linked Online Merchants Merchant Payment Gateway Value Added services 19

Ranking 8 th 4 th 4 th 4 th 2 nd 1 st 1 based on card spends issued; 2 based on volumes 3- based on card s issued *Based on RBI

20 We have a strong market position across Digital Payments solutions Axis Bank Market Standing Across Products Product Savings Accounts Debit Cards 1 Mobile Banking 2 Credit Cards 3 Point of Sale Terminals Forex Cards Market share 4% 5% 9% 11% 17% 45% Ranking 8 th 4 th 4 th 4 th 2 nd 1 st 1 based on card spends issued; 2 based on volumes 3- based on card s issued *Based on RBI data as on May 2017 except for Forex Cards. Savings Accounts data is based on RBI figures as on 31 March 2017 Source: RBI, Internal Data 20

21 and adoption of Digital Payments continues to remain strong Retail Customers Transaction Mix (%) Digital and ATM Transaction Volume (In Cr) 66% 67% ATM Credit & Debit Cards (POS & E-Com) Digital 52% 54% 58% ATM 36% 34% Branches 23% 21% 23% 12% 12% 19% 13% 10% Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Source: Internal Data 21

Our Mobile Banking spends are growing robustly and adoption

7 70% YOY 3 Million 8 Months Spends in ` Cr 2 Million 12

22 Our Mobile Banking spends are growing robustly and adoption cycles are shrinking Growth in Mobile Banking Spends Mobile Banking Adoption Cycles Million 4 Months Volume in Mn % YOY 3 Million 8 Months Spends in ` Cr 2 Million 12 Months 22,053 23,279 29,760 36,745 37,536 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 1 Million 18 Months Source: Internal Data 22

We are leveraging UPI to attract non-axis Bank

Interface (UPI) Is a huge opportunity For Axis

for 650 Mn by 2020 Any Banked Customer With a

Debit Cards User Base ~300 Mn Smartphone User Base

Unique Identifier: As simple as an email address

Penetration Axis Bank s Progress So Far 1 Over 2

transactions 3 Over 600 merchants on boarded 1)

23 We are leveraging UPI to attract non-axis Bank customers and broadbase payments Unified Payments Interface (UPI) Is a huge opportunity For Axis Bank India s innovation to the Payments world Is for 650 Mn by 2020 Any Banked Customer With a Smartphone 10 % Payments Transactions ~870 Mn Debit Cards User Base ~300 Mn Smartphone User Base ~150 Mn Potential UPI User Base 1 Analytics With a Unique Identifier: As simple as an address (Example: ajay@axisbank) Customer Product Penetration Axis Bank s Progress So Far 1 Over 2 Million registered base 2 Over 1 Million transactions 3 Over 600 merchants on boarded 1) Assumption 50% of Smartphone base Source: BCG Google Digital Payments 2020 Report July

24 We are also building a compreshensive merchant ecosystem with UPI App Based Payments Website Face to Face Custom Solutions In-App Registration Easy checkout process Complete set of APIs Faster Integration QR code, UPI@POS Billing System Integration Lean integration Bulk collections 1 st to launch UPI@POS Small Merchant Onboarding Business Segments Highlights Live with Reliance Retail Small Merchants Retail Chains E-Commerce B2B NBFC/Insurance Mobility Partners/Aggregators 3,000+ Daily Merchant Transactions 600+ Merchants 24

25 Our Cards Issuance business continues to grow and deepen the franchise Cards in Force Market Share 5.6% 7.2% 8.2% 9.9% 11.2% Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Cards Spends Market Share Market Share grew 2X in last 4 years 5.8% 7.1% 8.0% 8.7% 3.9% FY 13 FY 14 FY 15 FY 16 FY 17 Source: RBI Data Reports 25

26 Product Value Propositions Engagement value propositions Supported by a targeted value propositions to drive consumer engagements Miles Cobrand Cards Online Shopping Axis Bank Vistara Card Axis Bank Mile & More Card Axis Bank Buzz Card Axis Bank Neo Card Dining Privileges program EoSS* Partnerships * End of Season Sale 26

Our Acquiring business is focused on bringing

Base Merchants acquired in FY17 alone are

years Demonetisation and introduction of low

Bringing New Merchant Segments Under Fold

Axis Bank Integrated POS Canteens, Caterers

Cabs Small grocers (Tea stalls, Juice and Pan

27 Our Acquiring business is focused on bringing new merchant segments under the digital fold - By leveraging new low cost digital technologies In Thousands Growth in Merchant Base Merchants acquired in FY17 alone are greater than acquisitions done in the last 4 years Demonetisation and introduction of low cost solutions have propelled growth 218 Bringing New Merchant Segments Under Fold Traffic Cop Challan payment collections using Axis Bank Integrated POS Canteens, Caterers etc. using Standalone POS solutions Autos, Cabs Small grocers (Tea stalls, Juice and Pan shops) using UPI and Scan & Pay solutions FY13 FY14 FY15 FY16 FY17 27

28 Our Transit propositions are firsts in India and are enabling convergence of Retail and Transit payments The Card based Payment System The Transit Payment System Online Purchases Top Up Channels Open loop Multi Modal Transit Cards Card System managed by the Bank Card System managed by the Bank POS Purchases Acquiring System managed by the PTO/Bank Our Propositions with Partners 1 Automated Fare Collection system 1 st time open loop smart cards used in metro 2 India's 1 st prepaid transit card with shopping at over 1.3 million merchant outlets 28

29 Our propositions have the potential to digitize ecosystems Leave home Park the vehicle Grab a coffee Pay utility bills Board the metro/bus Online Purchases Grab a lunch (cafeteria) Reach office (Access Mgt) Back on the metro/bus Grab a snack (micro payment) Pick up Groceries Transfer salary to maid/driver Pick up the vehicle Back home 29

30 In Summary: We are focused on Creating Differentiation through Digital Payments Enablers for Creating Differentiation through Digital Payments Investing in Analytics Driving Cross-Sell Expanding Franchise To drive higher activity and consequently higher balances To Drive Higher PPC (Product Penetration per Customer) To capture payments share of non-axis Bank customers and drive cross-sell Fortify and Grow Capture Share and Grow 30

31 Thank you

BHIM UPI and BharatQR

Technical Report 2018 BHIM UPI and BharatQR Ashish Das Department of Mathematics Indian Institute of Technology Bombay Mumbai-400076, India January 2018 Indian Institute of Technology Bombay Powai, Mumbai-400