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5 Finance Innovations in 2023 you should know

With the Indian economy growing at an exponential rate, it is no surprise that the personal finance sector is booming. From the introduction of UPI to the emergence of innovative new products, the Indian personal finance space is evolving at a rapid pace. There are some exciting personal finance trends to look out for in India in 2023

1.QR Code: Perhaps the biggest innovation in the digital payments ecosystem are QR codes or Quick Response Codes. Originally designed to track industrial products by Japanese firm Denso Corporation, they have come a long way to help identify the beneficiary of any transaction. In India, Paytm doubled down on QR codes as a cheap and alternative mode of transaction to card terminals.

It was the first payment mode which brought Visa, Mastercard, American Express and our domestic card scheme, RuPay, under the same umbrella. Though it was launched with much fanfare, it was slow to take off. Eventually, now, QR codes have been mandated to be interoperable and accept payments from all UPI apps, helping unlock the true potential of these stickers pasted nowadays at almost every shop or merchant location.

  1. NFC Card: Although contactless digital transactions enabled by QR codes occur, if NFC technology hadn’t been invented, cards would have been dipped or swiped into point-of-sale terminals. Customers can use contactless card transactions with NFC enabled cards by simply holding their cards up to the terminal for a brief period of time, allowing the customer to be identified.

Card payments, which are in a survival struggle with smartphone-based payments, have been given new life by NFC. Thus, retailers utilizing PoS terminals could also adopt contactless payment methods.

Contactless card payments have become more popular as a result of COVID-19. In fact, the RBI recently raised the threshold for contactless payments to be processed without a pin-based authentication from Rs 2,000 to Rs 5,000.

Read also:10 Ways AI is Revolutionizing Banking and Finance

3. Instant Settlements available 24/7: The Indian digital payments ecosystem has benefited massively from instant settlement mechanisms. In India, retail customers can get instant settlements through IMPS (Immediate Payment Service), NEFT (National Electronics Funds Transfer) and UPI (Unified Payments Service).

While IMPS and UPI are run by the National Payments Corporation of India, NEFT is run by the RBI. Along with all forms of retail payments, through RTGS (Real Time Gross Settlement), even large value payments can be settled instantly through the week.

This mechanism gave rise to a vibrant peer-to-peer (P2P) fund transfer industry, where consumers can instantly settle funds with each other, and that too directly into their bank accounts and not any prepaid wallet.

For instance, with the rapid adoption of UPI, wallets lost a large chunk of market share in the P2P segment.

Also, now going beyond only bank-led payments, the NPCI, in a marked innovation, has opened up the rails for partnership with third-party apps, which does not need to be regulated entities. Multiple companies like Google, Cred, MakeMyTrip, and Just Dial joined UPI even without having a prepaid payment licence from the RBI. This brought in customers using these apps into the UPI ecosystem as well.

Today, Google Pay, Amazon Pay, PhonePe, all third party apps share the largest chunk of UPI transactions done across the country.

4. Video KYC: In the banking and financial services world, video KYC will go a long way as a symbol of transformation. Further, COVID-19 has taught even the most traditional institutions the importance of a digital customer onboarding process and video KYC is finding adoption there, too.

What it does is allow the opening of bank accounts and many other services to be done remotely. While players like Kotak Mahindra Bank was one of the first movers in this space, now even HDFC Bank has gone live with video KYC for a host of its services.

Another major impact of video KYC could be digital onboarding of credit card customers and consumer durable loan customers. Previously, the limit for a digital KYC process was Rs 60,000. With video KYC, there is no such limit.

5.Neobanks:Neobanks are digital-only banks that are built entirely on digital platforms. These banking platforms provide customers with an array of services such as online payments, deposits, remittances, and credit cards.

Read also:Finance Tips: 5 Investment Options for Financial Freedom in India

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