Emerging payment systems: Problems and prospects

Abstract

Payment systems around the world are today witnessing numerous emerging trends. One such major trend is gradual growth of new electronic payment instruments and channels owing to a shift towards digitization. These include card-less transactions using NFC technology, wallets etc. They not only provide invaluable data about customers to both merchants as well of issuers of these electronic instruments which can then be used for segmentation and marketing to the target customer group, but also provide opportunity for regulatory arbitrage owing to their single-step authentication process as opposed to the two-step authentication process used by traditional payment instruments like online banking, credit cards and debit cards. Another emerging trend is improvement in efficiency of traditional payment systems due to aggregation of various payment channels with increasing interoperability between these channels, desired by both customers as well as merchants which use these channels. This paper proposes a payment architecture which uses the skeleton of existing payment architectures, used for aggregation by National Payments Commission of India (NPCI), mVisa , Visa, Master Card and American Express, for aggregating the next generation electronic payment instruments like wallets to provide for seamless, cashless and interoperable payment experience on mobiles.