Digital payments allow consumers to track their spending habits, and can offer greater security than carrying cash. They also promote financial inclusion by providing access to low-cost transaction accounts.
When Martin Chorzempa moved to China as a researcher in 2013, he found an antiquated, cash-dominated financial system being reinvented by super-apps built by technology giants Alibaba and Tencent. This book is his account of this startling revolution.
1. SPIs are a more accessible entry point for smaller financial service providers
In some markets, big techs have been able to take advantage of their large customer networks and brand recognition to offer other financial services (Graph III.2, left-hand panel). For example, in China, where credit cards were not widely used when e-commerce firms first emerged, Alibaba’s Alipay and eBay’s PayPal have grown into the most popular payment platforms in the world, processing more than half of all online payments in the country.
Similarly, in other markets where bank branch penetration is limited and mobile phone ownership is high, large techs have used their platforms to expand the range of financial products they offer. For example, in India, WhatsApp’s messaging platform now offers money market funds and insurance products to its users, and in Kenya, M-Pesa has expanded beyond mobile money transfers to include savings accounts, loans and credit scoring.
The rise of these one-stop shops is partly driven by demand from consumers and small businesses. For example, a number of small and medium-sized businesses have switched to cashless payment systems in order to boost security and improve efficiency. The emergence of mobile payment apps has made it easier for consumers to make and receive digital payments, while reducing the need to carry large amounts of cash. In addition, these platforms can offer a cost-effective and user-friendly alternative to traditional banking services for consumers who are not yet comfortable with opening a bank account.
However, the decision to go cashless does not come without risks. For example, during the COVID-19 pandemic, many consumers stopped using their debit and credit cards because they feared being exposed to bacteria or other germs in public spaces. The St. Louis fast casual salad chain Sweetgreen, which went cashless in 2016 for efficiency and safety reasons, recently reversed its policy to accept cash again after the COVID-19 pandemic ended, as a way of ensuring that customers could continue to shop.정보이용료 현금화
The trend toward going cashless can also lead to higher borrowing costs for small businesses. This is because a larger proportion of business owners will have to share the costs of maintaining a digital payment system with a wider group of potential lenders. This effect can be exacerbated by trends such as bank branch consolidation and the growth of more costly alternative financial service providers.
2. SPIs offer a more accessible entry point for smaller financial service providers
As payments are increasingly digitised, it’s important for small businesses to keep up. That means incorporating the right payment solutions into their operations and upgrading their point of sale (POS) systems. But with so many options, it can be difficult to choose the right one. To help, we’ve compiled a list of the best payment processing providers for small businesses.
These companies offer a variety of services, including credit card processing, debit card processing, and mobile payment platforms. They also provide customer support and security features. They’re perfect for small businesses that need a comprehensive solution for their online and in-person sales needs.
One of the main advantages of a payment processor is that it simplifies the accounting process by automatically transferring funds from your customer’s account to your business bank account. This helps to reduce the amount of time spent on bookkeeping and allows you to focus on other aspects of your business. It also ensures that your business is always getting paid on time.
The emergence of digital payments has transformed the way people make and receive money. For the first time, millions of payees are able to accept electronic payments for the most mundane transactions, such as 10 cents for a cup of tea or $2 for a bag of vegetables. It is a huge behavioral shift that has made a tangible difference to consumers, merchants and the overall economy.
For smaller NBFCs, becoming a payments bank is a great way to expand their services and reach. They can also tap into the large consumer base in urban markets by offering services that are currently unavailable from a traditional bank.
To be a payments bank, the NBFC must apply to the Reserve Bank of India and invest in government securities with a maturity of up to one year. In addition, it must have a minimum paid-up capital of 100 crore and meet certain other eligibility requirements. Unlike traditional banks, payments banks will not offer loans and deposits. Instead, they will concentrate on providing payment-related services to the underserved, such as those who have migrated from rural areas to cities and send money home regularly.
3. SPIs offer a more accessible entry point for smaller financial service providers
Whether you’re a hairdresser or a mini-cab driver, there are plenty of reasons why it makes sense to offer your customers a card payment option. Card payments are fast, simple to process, and provide your business with valuable insight into consumer spending habits. But there are a few things you should know before selecting the best payment method for your small business.
The first thing to consider is the pricing structure. There are many different providers that can help you accept online credit card payments, and they’re all structured differently. Some charge a flat fee per transaction, while others assess a percentage of each swipe, dip, or tap. The key is to find a payment provider that offers a low cost and meets your business needs.
Another consideration is how well a payment platform integrates with your accounting software. Some payment platforms have a robust API that makes them easy to integrate with your other applications. However, other systems may have a more limited interface that requires manual data entry. Finally, you’ll want to consider the fraud protection and customer support that are offered with each service.
As you weigh the pros and cons of each payment solution, remember that it’s important to find a partner that will grow with your business. Choose a payment platform with a low processing fee, multiple countries of operation, and a comprehensive suite of features. Then, look for a partnership program that rewards your business with perks like discounts and cash back.
Lastly, the regulatory framework for SPIs is less stringent than fully authorised Payment Institutions. This makes it easier for new entrants to enter the market and compete with established players.
In India, the Reserve Bank of India (RBI) has recently proposed setting up small and payments banks to expand financial inclusion. These banks will be similar to existing commercial banks but will be able to accept demand deposits and provide payment or remittance services. This will be especially beneficial for people who migrate and send money home to their families. This can currently be done through post offices or third-party channels at high costs and inefficiently.
4. SPIs offer a more accessible entry point for smaller financial service providers
For small businesses, payment technology is constantly evolving and changing. Historically, new innovations were a minor change to point-of-sale systems and required only that a business upgrade its hardware or software. But the global shift to digital payments has shifted all of that and transformed how we do business.
For example, new technologies such as contactless or mobile wallets allow customers to pay with a simple tap of their phone and offer businesses the opportunity to capture more data about their customer base. While the initial investment for these new technologies may be high, the ROI is clear with reduced cash costs and increased sales.
Another way SPIs help small businesses is through their payment processing services. A payment processor connects merchant accounts with payment gateways, allowing businesses to accept credit card and other payments from their customers online. Payment processors vary in their fee structures and the types of payments they accept, with some offering a single integrated solution for all payment needs while others specialize in specific payment methods.
As a result, it is important for small businesses to research the various payment processing providers available and find one that best fits their needs. This includes evaluating transaction fees, pricing structures, ease of use, included features and quality of customer service.
In addition to payment processing, SPIs can also provide a range of other financial services, such as loans and micro-credit. These services can be especially beneficial for rural communities where banks are less accessible. Many SPIs also work with local governments and community groups to promote financial inclusion.
Lastly, SPIs can facilitate international remittances by linking domestic payment systems with those of other countries. This can reduce the cost and time of transferring funds abroad. For example, the SPI Directo a Mexico links the US FedACH system with the Mexican RTGS system to enable US-based remittances to Mexico.
To operate as a payment institution, SPIs need to be registered with their country's regulatory authority (e.g., the FCA in the UK). This registration process ensures that SPIs adhere to strict standards and regulations.