A recent article on TechCrunch describes why the ride-sharing company Uber has decided to start supporting cash payments in countries like India. Cash is the obvious solution as traditionally, cash has been universally associated and a standard payment method for transportation. Credit card penetration in quickly growing mobile markets is also low, in case of India just 4%. This means most people do not have access to card-based payments to pay for transportation, digital services and games.
At the same time, merchants need to expand their business into these markets as the biggest growth is happening here. But as Uber’s case illustrates, payment methods used need to change. Cash is one way to go, but it is inconvenient for the merchants themselves and does not work at all for making online purchases.
There is a multitude of alternative payment methods available, ranging from digital wallets to scratch cards. But integrating these alternative methods is challenging as every country has its own local payment methods. For India, cash payments can be integrated, but for Brazil Boleto Bancario is needed, Sofort is popular in Germany etc. This takes up valuable development resources and slows down the time to market.
One alternative approach for merchants to consider is to keep using their existing card-based payments infrastructure. This can be done through the use of virtual credit cards, topped up by consumers through the payment method with the second biggest global reach after cash. This would be carrier billing. In India alone, there are 20x more mobile phones than credit cards, making mobile payments almost as widespread as cash.
Merchants taking this approach would not have to integrate any additional payment methods for new markets as carrier billing has better availability than any other local payment method. Credit card providers (who also need to tap into markets where physical bank card penetration is limited) can instead plug in carrier billing on their side. For unbanked consumers, this means getting access to online payments with any merchant through a virtual credit card.
While such implementations are not too widespread today, it will be interesting to see if our predictions for 2016 will come true. Most people consuming physical and digital services are now located in markets with a lacking banking infrastructure, forcing merchants, credit card providers and mobile operators to co-operate and innovate.