<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner1251-3-1.webp" alt="M2P Fintech" title="" id="ilmzze2wy" width="100%" height="317">The world has been churning the Open Banking mill for years, and India recently joined the bandwagon. The Indian government set the scene for the Open Banking system with the advent of UPI in 2016. However, in the last two years (post-pandemic period), the nation witnessed an extensive acceptance and adoption of Open Banking in the BFSI sector, fast-tracking fintech innovations. This feat is directly proportional to the government's nationwide campaigns that include the roll-out of IndiaStack, the launch of scalable Open Banking initiatives by banks, and improved funding to Banking-as-a-Service platforms. Today, India is at the forefront of Open Banking with a market size of around 3 to 4 million customers and is expected to grow by 46% by 2026.<h2 class="heading-node" id="h3j68aay1" style="text-align: justify">What is Open Banking?</h2>Open banking is a new-age banking practice that provides Third-party Service Providers (TSPs) open access to consumer and financial data from banks and Non-Banking Financial Companies (NBFCs). It uses <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">Application Programming Interfaces</a> (APIs) to converge data from the banking world with the rest of the financial universe.It is imperative to note that financial data is made accessible to TSPs only after explicit customer consent. Thus, customer data is transparent yet secure and accessible anytime.Expected to hit $48 billion in 2026, open banking has accelerated technology innovation and adoption. It has facilitated a level-playing ecosystem via data portability and interoperability across the country. As trailblazers in enabling open banking ecosystems, fintech firms are aggregating data from various financial institutions and giving people and businesses more freedom in leveraging financial information.Open banking helps personal finance businesses analyze spending habits and offer personalized product recommendations. Lenders can comprehensively view customer’s financial situation, assess risk levels and offer optimal account terms. Customers can also leverage open banking to understand their financial situation before making financial decisions. By providing a window into customer behavior and expectations, open banking helps reshape customer experience and frictionless commerce.Before we go further, let’s explore the roots of open banking.<h2 class="heading-node" id="a0b5" style="text-align: justify">Origin of Open Banking</h2>The concept of Open Banking dates back to the 80s in Europe. Fast-forward to 2007, the arrival of a Payment Service Directive 1 (PSD1), harmonized payment services regulation and increased competition among financial service providers in the EU.The primary aim of PSD was to harmonize consumer protection with the rights and obligations of payment service providers and users. It established an integrated payments market that offered best-in-class security and infrastructure to the end users.&nbsp;PSD also allowed countries to include sections that are explicitly valid for their payment industry. It was released as legislation on November 1st, 2009, and accepted by all EU and EEA member states.However, even though PSD offered a comprehensive framework, it was not inclusive when considering international payments outside the European Union (EU). Furthermore, it was not designed for TSPs in its scope.These bottlenecks led the EU to build a more robust framework for this directive, which resulted in Payment Service Directive 2 (PSD2). It came into force on January 13th, 2018 with new rights for certain third-party providers (TPPs) to directly access online payment accounts with explicit customer consent through the bank's dedicated interface (built on APIs).Customer authentication is the main element of PSD2, and it encompasses the following points:<ul class="list-node" id="4wrs9fhmn"><li>Strengthen customer trust by deploying the highest standards of security</li><li>Offer a better pricing model to the consumers</li><li>Make transactions safe and secure</li><li>Level the playing field for payment service providers for both current upcoming players</li><li>Transparency in payment services</li></ul>Since this legislation has been out and about, many fintech, merchants, and tech players have been vigorously channeling their resources in becoming TPPs. PSD2 categorizes the TPPs into two categories.1. Payment Initiation Service Providers (PISPs): Regulated TPPs can initiate payments directly from the customer’s accounts based on their explicit consent.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-9-3.webp" alt="M2P Fintech" title="" width="100%" height="253">2. Account Information Service Provider (AISP): Regulated TPPs who access customer data and provide them a single view of all their accounts for better financial management. Even this action requires the customer’s explicit consent.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-10-2-1.webp" alt="M2P Fintech" title="" width="100%" height="253">PSD2 laid the groundwork for open banking, a practice that is very relevant, safe, quick, and easy to use.<h2 class="heading-node" id="29wqtnyhx" style="text-align: justify">Need for Open Banking</h2>The world of financial services is a dynamic environment. It can be primarily ascribed to the rise of new technologies in the digital banking ecosystem, heightened regulation scrutiny, and constant change in customer behavior and expectations. Besides these, the relentless search for a sustainable service model for underserved markets and additional revenue streams also define the landscape of financial services. &nbsp;In addition, FIs are obliged to stay compliant, manage costs, and maintain security and trust, and governments look for ways to boost innovation and competition across the banking sector. &nbsp;To manage complex customer needs and drive innovation and opportunity far beyond banking, the financial services industry needed to break through the conservative wall around the customer's financial data. Thanks to PSD2, banks and fintechs can now make the data useful and relevant. It now serves as the key to enhancing collaboration between financial services providers, rendering superior products and services for customers, reducing risk, pursuing strategic growth opportunities, and adapting to the new-age banking ecosystem.<h2 class="heading-node" id="i8q4vgmvm" style="text-align: justify">Closed Banking Vs. Open Banking</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-11-4.webp" alt="M2P Fintech" title="" width="100%" height="253"><h2 class="heading-node" id="dc6a" style="text-align: justify">How do APIs work in Open Banking?</h2>APIs are the backbone of Open Banking infrastructure for two reasons.<ol class="list-node" id="6ipr9y3o8"><li>It facilitates the exchange of information between two financial parties</li><li>It offers secure interoperability that is compliant with region-specific laws and regulations</li></ol>The world of finance sees it as an open source platform that allows legacy financial institutions to collaborate with modern age fintech platforms.&nbsp;With APIs at the forefront, customers will get a consolidated view, and financial providers such as lenders will get the required data to make the right decisions. This empowered banks and FIs to revamp their products and services to meet ever-changing customer needs.&nbsp;The APIs can be classified into three categories:&nbsp;<ul class="list-node" id="z7d94jny8"><li>Public APIs are the most popular connectors for open banking. They give TPPs access to customer information from the bank, but they don't store or save that information for later use.&nbsp;</li><li>Partner APIs are specific APIs designed to allow the exchange of data between two companies or businesses. They facilitate vendor-to-vendor communication channels.&nbsp;</li><li>Internal APIs are proprietary APIs used by an organization to secure and manage its own database.</li></ul><h2 class="heading-node" id="6a44" style="text-align: justify">Use Cases in Open Banking</h2>Financial ServicesOpen banking is all set to reinvent the way financial services are now perceived. The highlight of this reinvention is that they do not intend to eliminate the players but give them a new avatar. In simple terms, there is no customer data without banks.A bank’s responsibility is to provide the necessary platform for its customers to have their pick of the services. As fintechs are now offering that choice, banks are pressed to reinvent and partner with these new age fintechs to retain the competitor status. Today, several leading banks have formed successful partnerships with fintechs to offer the following services.<ul class="list-node" id="ypujhtj6f"><li>A comprehensive view of core banking accounts</li><li>Payment services and choice of networks</li><li>Commercial and personal loan histories</li><li>Tailored investment portfolios</li><li>Native bank apps and enriched experiences</li></ul>Small businessesAkin to individual customers, small business owners can use open banking to gain insightful visibility into their financial management. They will be able to understand the realities and ripple effects of their financial decisions such as loans, mortgages, and expansions. Small business owners can leverage the understanding to improve their cash flow. Likewise, lenders can devise practical loan offerings with an expedited delivery timeline to meet business needs.InsuranceInsurance providers can access a complete, dynamic, and current portfolio of the applicant’s finances. They can use the data to draw sound insurance decisions that matches the client’s best interest and business profitability. The customers also get an unparalleled view into spending behavior resulting in diligent financial decisions.CustomersOpen banking is all set to provide customers with a supermarket aisle experience where they can pick and choose the financial products they want. This tailored experience offers several advantages to new-age customers as listed below.<ul class="list-node" id="a66wr4nq7"><li>Augmented account visibility and security</li><li>In-depth visibility into spending habits and behaviors</li><li>Instantaneous access to market investments</li><li>Interoperable online and physical payment options</li></ul><h2 class="heading-node" id="uv1rt4xby" style="text-align: justify">Challenges in Open Banking</h2>Open banking removes interpersonal relationships between the customer and the bank. As everything is handled digitally, the human connection takes a dive.Customers might not be willing to share their details, and there could be a lack of apathy/credibility from the customer. Convincing them about the benefits and converting them into leads might take a while.Security concerns play a huge role in this field as it is a relatively new field, and it is filled with many trial and error situations that are yet to happen.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-12-1.webp" alt="M2P Fintech" title="" width="100%" height="253"><h2 class="heading-node" id="47f6" style="text-align: justify">Opportunities in Open Banking</h2>The open data philosophy will improve the transparency and democratization of the banking platform. It will provide access to the credit deprived and also facilitate entry into foreign markets. The most important benefit of all would be the ideation and creation of apps that will be fielded in the market by upcoming fintech players. Tools like Artificial Intelligence and Machine Learning will be able to predict solutions based on customer spending habits. Automation will be a game changer for many services.Intrigued about the forthcomings of open banking and financing?Reach out to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a> to know more.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Open Banking- A primer

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-8-17.webp" alt="M2P Fintech" title="" width="100%" height="284">Meet Maathavan, our VP- Architecture, whose mantra is to never stop learning. With varied interests ranging from agriculture to technology, Maathavan is well-known in M2P for analytical thinking and humble nature. Read on to know more about him and what drives him to be his best at work every day.<h2 class="heading-node" id="9bf2">What happens in your typical day at M2P?</h2>When I get inside the office, the first thing I do is clean and reorganize my workspace. The level of cleaning often depends on my mood and the time I reach the office. Once the cleaning is done, I start working as per the list I had already drawn up the previous day. While all this happens, I also take a little break to brainstorm and discuss new and existing projects with my colleagues. Often these Eureka ideas happen at the Mulberry tea shop, which is our favorite place to regroup and chat about our plan of action. Those discussions have sometimes gone for two or three hours at a stretch.<h2 class="heading-node" id="8f39">Have you always wanted to be a developer?</h2>No, not exactly; I wanted to be in so many professions just like every other kid out there. But when I saw my dad, I wanted to be an architect who designs impressive buildings, but in school, I had an aptitude for solving problems. So even though I wanted to opt for Civil Engineering, the popular choice at home was Electronics and Communication Engineering. I also wanted to learn the CORE STEM of Electrical or Computers, so it was a comfortable choice. Soon, software development became my cup of tea, and today I am a Solutions Architect.<h2 class="heading-node" id="9972">If you had your heart set on being a developer, how did fintech become a part of it?</h2>Working in the fintech industry happened purely by chance, and I didn’t exactly have any thoughts about which industry I should make my mark.&nbsp;Then, as a fresher, I got an opportunity to work with FSS, where I was exposed to both closed and open-source platform projects that helped me master many software languages. So my learning has been huge in this industry, along with opportunities as well. And then, as they say, the rest is history.<h2 class="heading-node" id="a7a0">What drew you to M2P?</h2>I was working in the gaming industry for some time, but I lacked the drive to be my best during that time. So, I was actively searching for opportunities to be part of the fintech industry again. And as per tradition, we usually turn to our friends when we face professional troubles. Those conversations led my friend to introduce me to Muthu, our CTO. After an insightful discussion, I found out that my thought process had found a match with M2P. It has been a great ride till now.<h2 class="heading-node" id="8cd1">Has COVID altered your working style?</h2>Yes, it has tremendously, and I think like everything else, there are two sides to a coin. I am enjoying the flexibility of choosing my work hours. I also get to spend time with my family and often attend team calls with my little helper (son). But I do miss my co-workers and our interactions. We would brainstorm, discuss and argue about our ideas, solutions, and the next step. It was also fun. I want to get back to physical work as soon as possible (laughs)<h2 class="heading-node" id="af94">Do you see any change in the fintech code community pre and post-pandemic?</h2>Yes, there has been a significant change. Earlier, people were not so trusting with a card, UPI, or NFC payments. With COVID on the rise, people were willing to try out different payment methods. For example, there has been a massive increase in online shopping today, so it creates a demand for payment gateway and other allied services; it is sort of a ripple effect that creates a need for innovative means of payment and so on. In fact, fintech is moving way faster than it was before the pandemic.<h2 class="heading-node" id="9873">Have you played a practical joke in college?</h2> Nothing much in college, but I did have my share of fun in school. It was my friend’s birthday, and we were celebrating it at another’s friend home, which was near our school. Incidentally, it was the day of our final exams. So, when the whole school was diligently writing exams, we were busy partying. Needless we got caught in the act by our principal, who suspended us for a day. Like these, there are many instances of us playing hooky in school.<h2 class="heading-node" id="67e2">What’s that one thing your colleagues don’t know about you?</h2>I used to write poems during my school and college days<h2 class="heading-node" id="7c3a">What are your other interests?</h2>I love to go on treks, solving puzzles, and play chess and shuttle. Also, I am a hard-core foodie who loves to taste a variety of cuisines.<h2 class="heading-node" id="3e46">What will you love to build/develop in case you have unlimited resources and time?</h2>It is more of a thought process rather than an idea. I would like to explore different ideas like multistoried farming, different techniques of farming, and devise ways to create a self-sustaining energy source.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Meet M2P’s Solution Architect

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner.webp" alt="M2P Fintech" title="" width="100%" height="253">Have you ever noticed the numbers on your credit/debit/prepaid card? They have a string of numbers out of which the first six digits are called Bank Identification Number (BIN). The BIN number helps the merchant processor identify the card type, network, and the issuing bank for the transaction’s approval/decline. For instance, a Visa card starts with the number “4.” Master card starts with the number “5” and “2”, Diners starts with the number “3” and so on.They also enable merchants to accept different types of payments like digital and mobile payments.Now with the explosion of payment electronification and many becoming savvy financially, there has been a drastic increase in the number of card users. This, in turn, has led to a shortage of BINs; if we take a rather dim view, it can be observed as depletion of BINs.To stop this from happening, the International Standards Organization (ISO) amended the existing standard of (ISO/IEC 7812–1) Part 1: Numbering system from Six-digit to Eight-digit BIN in 2017. So, card networks such as MasterCard, Discover, American Express, Visa and others have started prepping for the change.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-24-copy.webp" alt="M2P Fintech" title="" id="adfawcve6" width="100%" height="253">Visa has been quite active with this change and regularly issuing updates and ready reference guides for this migration. Visa adopted this standard in 2017 and has urged its partners to migrate to the Eight-digit BIN by the end of April 2022.<h2 class="heading-node" id="69d4" style="text-align: justify">Who will be affected by this migration?</h2><ul class="list-node" id="lbi86ft9q"><li>Acquirers</li><li>Issuers</li><li>Processors</li></ul>MerchantsOn completion of April 2022, the card network’s 100,000 BINs will migrate to 10,000,000 BINs. The first Six-Digits will remain the same in this change, and the following two numbers (00,01,02…) will become part of the Eight-Digit BIN. Also, there will be no need to reissue replacement cards to the customers.Here are the key points that sum up this initiative:<ul class="list-node" id="vxdxnev6w"><li>After April 2022, the existing 6-Digit BINs will continue to function, and requests for new BINs will be assigned in 8-Digits.</li><li>6-Digit BINs will be supported, but they won’t be forced to convert to 8-Digit BINs</li><li>PCI guidance and Visa clearly outline that organizations storing the full 8-digit BINs require additional controls may include expanded scope.</li></ul><h2 class="heading-node" id="f71d" style="text-align: justify">Why the sudden urgency about this migration?</h2>While the standard is out for migrating to Eight-Digit BINs, ISO did say that they are maintaining the other issuing BINs in the six-digit sequence until the deadline of April 2022. The mandate also doesn’t require the removal of Six-Digit BINs. Therefore, the concerned parties must continue supporting both Six and Eight Digit BINs.The time taken for the adoption will significantly vary by the stakeholder. So, even though the deadline is still 10 months away, there is a concern regarding the impact of updating the backend systems. Especially those involved with issuer processing, routing, and other activities need to assess the impact and get ready for the changes.Industry watchers were almost sure that this initiative will call for a longer PAN. Still, Visa has decided to implement the same on the existing 16-digit- PAN structure. It has become quite clear that the decision will affect the PCI compliance of the existing truncation and masking rules. Any organization that stores the full BIN and the last four digits of the card will become non-compliant unless the rules are not modified.The decision did not specify any modification, and it requires organizations to handle 8-digit BIN as cardholder data. But organizations that spent massive efforts over the years to lower their PCI compliance load will face an explosion of responsibilities and remediation efforts. It will probably result in actions, expense, and their own timeline of non-compliance.So, card networks have been encouraging its vendors, agents, partners, and other stakeholders to actively assess the impact they would be experiencing across their systems. This assessment would help them to increase their efficacy and avoid any hurdles when handling transactions.<h2 class="heading-node" id="005c" style="text-align: justify">How does this change impact?</h2>As six-digit BINs are on the decline, it will be challenging to rely on them for authorization, routing, and transaction clearing. The effect might not be immediate but will slowly and surely escalate when Eight-Digit BINs become the norm. Both Merchant and Service providers might face issues in the following scenarios:<ul class="list-node" id="j85h67z8k"><li>Prepaid card’s identity</li><li>Chargeback and Fraud</li><li>Transaction processing</li><li>Merchant services and disputes</li><li>Reporting</li></ul><h2 class="heading-node" id="7198" style="text-align: justify">How to prepare for the change?</h2>Visa has issued directives for both merchants and service providers on how to handle this change. They have explicitly said that the changes are specific and may need to require a timeline extension. So, organizations, service providers, and other stakeholders are encouraged to initiate and pool the resources necessary to prepare for Eight-Digit BINs.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

The BIN Migration|Preparing for 8-Digit BINs

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner1251-13.webp" alt="M2P Fintech" title="" id="hytqs9p1m" width="100%" height="356">We have come a long way in payments starting from the barter system, coins, currencies, paper cheques, and plastic cards to one-click payments, e-wallets, and <a class="link" href="https://m2pfintech.com/blog/blockchain-and-fintech-use-cases-and-applications/">cryptocurrencies</a>. Payment space keeps evolving at breakneck speed with new technologies that focus on bringing more convenience than ever before. Wallets and currencies are now out of action and considered obsolete by the millennials. Ever since the emergence of contactless payments, we are entirely freed from carrying traditional currencies everywhere. Technologies keep providing users with a better payment experience and NFC is one of them.Here is a short story that illustrates the brief above.One sunny morning, the grocery store’s aisle was my runway. I was excitedly grabbing all my favorite drinks and snacks for the ‘Netflix weekend’ scheduled with my friends. So, I head to check out with a happy face and a fully loaded cart. Unfortunately, that is when I found out that I forgot my wallet.So, in this scenario, what was the state of action?Scenario 1:&nbsp;I ran back home to get my wallet.Scenario 2: Got a favor from the shopkeeper to pay him back later.Scenario 3:&nbsp;Forgot all the fuss and used my phone to complete the payment.And nowadays, Scenario 3 is the hero everywhere as people have their cards and applications loaded in their smartphones to make payments anywhere anytime. NFC is one of many such technologies that is smoothing the way.<h2 class="heading-node" id="de52">What is NFC?</h2>The abbreviation stands for Near Field Communication. It is a wireless technology that initiates the communication between two nearby electronic devices to provide the most convenient experience to customers globally. NFC makes the transactions and digital content transfer simpler by connecting the electronic devices using electromagnetic fields.<blockquote class="block-node" id="1eqo4mvgr">NFC initiates the connection at a distance of 4cm or less and operates at the frequency of 13.56 MHz to make secure transfers.</blockquote><h2 class="heading-node" id="ed11">What are NFC payments?</h2>NFC payments are popular contactless payments that use NFC technology to initiate the connection between the reader and the NFC-enabled devices. You can pay using smart devices like mobiles, watches, or simply tapping debit/credit cards. It initiates secured, convenient, fast, encrypted, and touchless transactions at the point of sale.<h2 class="heading-node" id="c903">Mechanism and applications of NFC technology</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-11-3.webp" alt="M2P Fintech" title="" width="100%" height="284">NFC is a specialized branch out of RFID (Radio-Frequency Identification), a widely used technology for asset tracking, access control, attendee tracking, and much more.NFC creates a short-range communication using electromagnetic radio fields between two devices — one to transit and another to receive a signal, just like how you connect your Bluetooth device.The devices are differentiated into two- Passive and Active. Tags and other small transmitters are considered passive devices since they contain data that other devices can read, whereas active devices can read and transmit data. Such active devices are your smartphone that reads and helps share necessary data with other compatible devices if required.NFC is now introduced in a chip format as well. A beauty salon in Dubai recently introduced ‘chipped nails’ where a tiny chip is embedded in the nails and used to transfer information such as your digital business card or social media handles by just tapping your fingernails on the device. These services can expand to contactless payment systems too.NFC is used in three simple modes:<ul class="list-node" id="wqfacotvm"><li>Peer-to-peer mode:&nbsp;Two active NFC-enabled devices can initiate a connection to read or transmit information between each other. The Android Beam Technology uses this mode to transfer information and enable Bluetooth devices.</li><li>Reader/writer mode:&nbsp;We can read/write information from a passive device (contactless smart card or RFID tags) using an active device(smartphones/smartwatches).</li><li>Card emulation mode:&nbsp;Here, NFC acts as a contactless card, and we can use our smart devices in place of debit or credit cards to make digital payments.</li></ul><h2 class="heading-node" id="9a7f">How do NFC payments work?</h2>Contactless payments are now mushrooming with its wide range of options like EMV chip cards, mobile wallets, QR codes, and digital payment apps for the customers to experience ‘touchless and effortless’ check out and save time during their shopping spree. Moreover, they are a faster and secure mode of payments as there is no need to enter a PIN as it transfers the encrypted data to the NFC device instantaneously.NFC links the payment and reader devices wirelessly when they are closer to each other. Once connected, the payment can be initiated from the payer’s devices like smartphones and smartwatches through the installed payment applications like Google Pay, Samsung Pay, Apple Pay, etc. Then, the payer must just hover the device near the payment terminal, and NFC chips exchange encrypted data for completing the transaction within few seconds.<h2 class="heading-node" id="3528">How do merchants accept NFC payments?</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-9-2.webp" alt="M2P Fintech" title="" width="100%" height="284">All a merchant needs is an NFC-enabled reader to accept the payments, and that’s that. The shopper can make NFC payments through smartphones, smartwatches, and NFC-enabled accessories — wristbands, phone cases, or rings. These devices have a small chip that communicates with the merchant’s NFC reader via radio waves.The shoppers have now picked their goodies - CURTAINS UP!Now, the merchant ensures the NFC reader’s connection is good to go. The shoppers bring their NFC-enabled device closer, typically within two inches, or simply tap the cards (with contactless indicator displayed on them) on the reader. The shopper unlocks the app with the PIN/use biometrics and selects the card to complete the payment.<h2 class="heading-node" id="32bd">How are NFC and EMV connected?</h2>EMV and NFC are closely connected in changing the payment landscape to hit the big time with secure and encrypted payments. EMV stands for Europay, MasterCard, and Visa — named after the organizations found. EMV is the payment technology that enables transactions with chip-embedded cards, whereas NFC is the digital version of EMV offering contactless payments.EMV payment is carried through the small computer chip embedded in the debit and credit cards. This chip communicates with the POS when dipped to authenticate the transaction successfully. These highly secured payments can be made using EMV-enabled devices and readers. To avoid any fraudulent activity, for every EMV transaction, a unique transaction ID is created, which cannot be replicated. Additionally, the cardholder must enter a PIN/ sign the receipt to complete the transaction. NFC is the technology that facilitates EMV transactions digitally using smartphones giving the ease of not carrying a physical card.On the flip side, NFC payments are contactless and follow tap-and-go technology. As said, gestures like hover or tap are all you need to complete the transaction.EMV is a bit slower when compared to NFC in processing a transaction. So, most customers still prefer opting for NFC to save time in a big queue as it is also as secure as EMV. So, merchants can opt for readers that accept both NFC and EMV payments to provide customers with a seamless checkout offering the latest and stress-free payment options.<h2 class="heading-node" id="bb30">Benefits of NFC Payments</h2>These wireless innovations give a better user experience and prove anything can happen at our fingertips. NFC has changed how merchants and shoppers look at making payments. It has also made both merchants’ and shoppers’ life simpler.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-10-1-1.webp" alt="M2P Fintech" title="" width="100%" height="284"><h3 class="heading-node" id="6ae9">(i) High-level security</h3>NFC payments are incredibly secure when compared with cash or magnetic-stripe cards. This is because the payment transactions are end-to-end encrypted, and details are highly secured.The customer can pay only at the POS terminal using their devices by providing the PIN/biometrics to unlock the payment screen. Another added security is that NFC payment readers can connect only one device at a time. This can prevent situations like customers paying for the wrong bill.<a class="link au nf" href="https://medium.com/m2p-yap-fintech/how-does-payment-tokenisation-work-d2f47186f718" rel="noopener">Tokenization</a>&nbsp;also plays a major role here. When people use apps like Apple Pay to carry their transactions, their sensitive payment credentials are masked with random strings of characters (tokens) to battle online and digital breaches. This new token is generated whenever you make a new transaction.<h3 class="heading-node" id="ce00">(ii) Comfort and convenience</h3>Shoppers don’t have to carry their wallets everywhere. They can simply use their smart devices for an easy checkout process. Another added functionality is to store multiple debit/credit cards in the payment apps and personalize the transaction according to their needs. Simple gestures like tap, wave, and hover are needed, and the payment is complete.<h3 class="heading-node" id="7719">(iii) Saves time at checkout</h3>Dealing with cash or using magnetic stripe cards consumes more time for both merchants and shoppers. Sometimes, shoppers skip purchasing in a few stores with a long queue in the POS terminal. To avoid such situations, merchants need to upgrade their POS terminal by providing a smooth experience to their customers, which increases their sales. So that, shoppers can save time in the checkout process when they opt for NFC payments. The less time it takes to complete the transaction, the more the customer is satisfied.<h3 class="heading-node" id="86b0">(iv) Touchless &amp; contactless</h3>The corona pandemic triggered the urge for contactless payments. This resulted in a steady increase rate of people opting for contactless payments. As a result, people are slowly opting for contactless payments that guard them against the spread of viruses when dealing with cash or card receipts.<h3 class="heading-node" id="8d5c">(v) Cost-efficient</h3>Since everyone’s best friends is their mobile phones in their everyday lives, NFC payments are cost-efficient for payee and payer sectors. So, the merchants must get an NFC reader and upgrade their payment terminal to seamlessly carry out the NFC payments. This even a small business merchant can afford to uplift their business. NFC reader is the better choice for merchants as it consumes less power too.<h2 class="heading-node" id="z3arn9s6q">NFC payments and its rapid evolution</h2>Contactless payments are omnipresent post the pandemic even though they were already a popular payment method before. Even exchanging money was considered a perilous task during this pandemic, but NFC has come to the rescue with its touchless feature. As a result, most people have upgraded to NFC payments helping businesses to drive their sales and ensure safety at the same time.The stats further strengthen the payment space with all positive predictions.<ul class="list-node" id="qlq2muew4"><li>The global market value of NFC payments is estimated to exceed $10.4 billion by 2026, with more than 14.5% CAGR from 2021 to 2026.</li><li>According to the report by Payments Journal, 30% of the consumers are making their payments contactless after the pandemic. Moreover, 70% who are new to this payment space wanted to continue making their payments contactless even after the pandemic abates.</li><li>The NFC’s market size is flourishing and is expected to touch $30 billion by 2023.</li></ul>The future of NFC payments, as predicted, will remain on the rise and will shape the payment space for the better over the next few years. Fintechs further mold it by offering innovative resources to provide the most convenient payment method for customers.One thing is sure, the NFC payments are here to stay, and the future holds more for payment space.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

NFC Payments - Simplifying Payment Space

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Future of Digital Payments: Matched With Industry Needs

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner1251-12.webp" alt="M2P Fintech" title="" width="100%" height="662"><a class="link" href="https://m2pfintech.com/blog/neo-banking-101-all-you-need-to-know/">Neo banks</a> deliver digital banking services on steroids. The digital empowerment and financial possibilities they offer the underbanked and unbanked population are phenomenal. Their ability to foster <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion</a> with digitized convenience, lower cost, and personalized customer experiences are a few of the primary reasons for the success of <a class="link" href="https://m2pfintech.com/blog/top-14-neo-banks-that-reinvent-banking-experience-in-india/">neo banks in India</a>.Competing heavily on customer-centricity and deep tech, neo banks bridge the experiential gap between traditional banking services and evolving customer expectations. Free from legacy infrastructure hurdles, complex value chains, and stringent regulatory requirements, neo banks deliver super-fast, mobile-first services by leveraging advanced, agile, and lean business models.In the next five years, the global neo bank market is slated to grow at 47.1% and hit $333.4 billion market size. In India too, neo banks are a thriving industry with a huge market potential of over 190 million unbanked/underbanked people who still need access to basic financial services.So, if you are looking to set foot in the <a class="link" href="https://m2pfintech.com/blog/neo-banking-the-rise-of-new-age-banking/">neo banking</a> industry, this is the opportune time for you.We are here to help you with step-by-step guidance.Now, this is not unqualified guidance. We have immense experience and expertise in enabling neo banking services for leading players like Zenpay, Niyo, and Finin.Let’s get started!<ul class="list-node" id="4te59z1wy"><li>Step 1:&nbsp;Define target audience &amp; value proposition</li><li>Step 2:&nbsp;Identify and analyze audience pain points</li><li>Step 3:&nbsp;Work on innovative, customer-centric strategies</li><li>Step 4:&nbsp;Build a strong core and backend infrastructure</li><li>Step 5:&nbsp;Focus on experience design</li><li>Step 6:&nbsp;Manage compliance and security</li><li>Step 7:&nbsp;Ease onboarding, engagement, and marketing</li></ul>Fasten your seat belts!<h2 class="heading-node" id="958f" style="text-align: justify">Step 1: Define target audience &amp; value proposition</h2><a class="link" href="https://m2pfintech.com/blog/top-14-neo-banks-that-reinvent-banking-experience-in-india/">Neo banks</a> challenge the status quo of banking and payments for niche audiences. Hence defining that target audience is imperative to set up a neo bank.For example, neo banks like FamPay&nbsp;cater to teenagers, and&nbsp;Zenpay&nbsp;caters to blue-collared workers. FamPay’s proposition comprises cards and bank accounts that teenagers can use under parental supervision. Whereas Zenpay offers payroll cards that provide blue-collared workers instant access to salary and incentives.So, you need a crystal-clear understanding of your audience demographic and pain points to develop a value proposition accordingly. This will help you come up with a definitive reason why your customers should choose you.<h2 class="heading-node" id="9b55" style="text-align: justify">Step 2: Identify and analyze audience pain points</h2>Once your target audience is clearly defined, identify and analyze your target audience’s needs and pain points. This knowledge will help you include features that resolve audience issues, build trust and attract the right customer to your service. For example, Zenpay came at a time when the blue-collared workers were underbanked and were not able to access salaries and track their spending. The lack of access to salary accounts and other financial exclusion was the pain point for Zenpay’s audience. And their value proposition and services sought to resolve the challenge.Looking at your target audience’s pain points and working to close the gaps is a key step while setting up a neo bank. This knowledge will help you differentiate and stand apart from other players in the industry.<h2 class="heading-node" id="9050" style="text-align: justify">Step 3: Work on innovative, customer-centric strategies</h2>Neo banks stand apart because of their agile, innovative, customer-centric business strategy. Leverage technology to make your business model and strategy as convenient and user-centric as possible. Pack in unique features that will get your customers coming back to you.When it comes to features, some are must-have, and others are nice-to-have types. Must-have features are a necessity, without which the product or service will surely fail. Nice-to-have features are those that will add greater value and aid greater customer acquisition and retention.Here are some examples for more clarity.<h2 class="heading-node" id="7961" style="text-align: justify">Must-have features</h2><ul class="list-node" id="rcccmzkkk"><li>Low-cost structure</li><li>Easy money flow across borders</li><li>Quick account creation</li><li>User-friendly Interface</li><li>Real-time banking solution</li><li>High yield savings</li><li>Personalized card issuance (Physical/Virtual)</li></ul><h2 class="heading-node" id="b571" style="text-align: justify">Nice-to-have features</h2><ul class="list-node" id="zqdexn79o"><li>Zero joining fee</li><li>Zero annual Fee</li><li>Zero hidden Charges</li><li>Zero documentation</li><li>No-cost EMI</li><li>Personalized banking services</li><li>Educational loans/investments</li><li>Seamless budgeting</li><li>Tangible rewards</li></ul>With advanced technologies such as Artificial Intelligence and Machine Learning ruling the neo banking industry, you can include new features, upgrades, and everything your target audience expects without any hassles.<h2 class="heading-node" id="b472" style="text-align: justify">Step 4: Build a strong core and back-end infrastructure</h2>A robust neo banking app demands the best suite of core and back-end applications. As it has to deftly manage multiple applications and transactions without lags, the core and back-end infrastructure must be powerful enough. To build a strong neo banking app, you need <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">APIs</a>, a card processing app, and back-office tools.<ul class="list-node" id="fg87tfapd"><li>API:&nbsp;To connect your neo bank app with other services like payment gateway or authentication segment.</li><li><a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">Card Processing App</a>:&nbsp;This&nbsp;app is responsible for all the transactions or anything related to cards.</li><li>Back-office Tools:&nbsp;Manages the neo bank in the whole perspective.</li></ul><img src="https://miro.medium.com/max/1400/1*hYBMUudyKsAoH36Za4l89Q.png" alt="Backend infrastructure framework to create Neobanks" title="" width="100%" height="529">The back-end infrastructure can be built in three different ways.<h3 class="heading-node" id="e1a9" style="text-align: justify">1. Developing from scratch</h3>You require a banking license and a huge investment of time, effort, and money, as you are developing infrastructure, design, implementation, tech stack, and also the future sketch by yourself.<h3 class="heading-node" id="822d" style="text-align: justify">2. Partnering with banks</h3>To minimize the time and effort, you can integrate with established banks and get your neo banking model started. It also does not require much work in terms of customer acquisition as you can leverage the bank’s trusted customers, to begin with.<h3 class="heading-node" id="94bc" style="text-align: justify">3. Partnering with <a class="link" href="https://blog.m2pfintech.com/wp-admin/post.php?post=2422&amp;action=edit">BaaS</a>/API Provider</h3>You can partner with fintech companies to provide <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">APIs</a> to develop the core and bank end infrastructure for your neo bank. This decision with catapult your go-to-market speed to the next level with lower investment in terms of time and effort.For example, fintech firms like&nbsp;<a class="link au mu" href="https://m2pfintech.com/" target="_blank" rel="noopener ugc nofollow">M2P</a> power neo banking apps by delivering tech stacks and best-in-class infrastructure to build customized products with seamless integration. We serve as an account aggregator of multiple banks and help neo banks leverage our partnerships and compliance to its best potential.When it comes to card transactions, we take care of webhook notifications, reconciliation settlement, and even customer reports. For some of our neo banking customers, we also created co-branded debit cards with banks. We help them design their own debit card with features like multiple controls (PIN), lock/unlock cards, security measures, setting preferences, virtual cards, and more.In India, neo banks do not work independently. Hence partnering with the right banks and API providers is critical to increase go-to-market speed and achieve growth and profitability.<h2 class="heading-node" id="fbc3" style="text-align: justify">Step 5: Focus on experience design</h2>Humanizing transactions and enabling personalized experiences is key for the success of a neo banking app. To that end, you need to prioritize experience design for visually appealing app design and easy-to-understand interfaces and clear call-to-action.Experience design enables frictionless navigation and improves customer experience by focusing on speed, convenience, security, and seamlessness. Ensure your neo banking apps are aesthetically designed for a smooth customer journey and satisfaction.<h3 class="heading-node" id="a249" style="text-align: justify">Step 6: Manage compliance and security</h3>Better the security, better the trust!Regulatory compliance and security infrastructure design play a significant role in neo banks, as customer data and money are at stake here. Managing <a class="link" href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/">PCI DSS compliance</a>, <a class="link" href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/">tokenization</a>, the generation and issuance of payment tokens, and the operation and maintenance of a token vault is a laborious yet critical process.Hence, start with setting up the Security Office Center (SOC), which will function as a command center for your neo bank app. This helps you in analyzing every crumb of information in your infrastructure. You can even implement Security Information and Event Management (SIEM) software solution to secure and analyze every activity in your neo bank.You can even go the extra mile by building your own security tools and solution to protect customer data. It is highly advisable to maintain access logs or anything happening in your neo bank platform to have a record for your security team to look into any time in the future.Before stepping onto the deployment stage of your neo bank, run a series of checks and automated tests to identify and get rid of the issues. Think of every possibility your user may utilize your app for. Here’s a series of tests you can opt for:<ul class="list-node" id="yk7tuv0ut"><li>Unit-testing</li><li>Integration testing</li><li>Security testing</li><li>User acceptance testing</li><li>Regression testing</li></ul>Ensure your team runs the tests even after the app goes live because this lowers the chance of your app facing security issues later. Automating the tests by implementing a custom infrastructure helps in this case.Fuse security onto DevOps — <a class="link" href="https://m2pfintech.com/blog/devsecops-the-future-of-financial-software-development/">DevSecOps</a> to develop your neo bank application. At the time of upgrades and new releases, you can go to market quickly and seamlessly.<h2 class="heading-node" id="ecd2" style="text-align: justify">Step 7: Ease onboarding, engagement, and marketing</h2>Don’t just sit back after launching your neo bank. Your journey has only begun.Ensure onboarding is simple, smooth, and effortless for customers. Focus on marketing efforts to acquire and retain customers. Ensure you engage your customer throughout their journey with your neo bank.Remember, the profitability of your neo bank can be determined by the customer Life-Time Value (LTV)/ Customer Acquisition Cost (CAC) ratio. The higher the LTV/CAC ratio, the greater will be the income generated per new customer. So, the key is to keep your customers happy.All set to start your own Neo bank? Got more questions in your mind?Ping us at&nbsp;business@m2pfintech.com.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

7 steps to start a Neo bank from scratch

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Bring-to-me-Blog_31May21-2.webp" alt="M2P Fintech" title="" width="100%" height="358">Brian was a kid who loved bedtime stories, and every day his mother picked a new book for his bedtime story. One day, his mother read him the Japanese folktale “The Magic Mortar.” In this folktale, the magic mortar gave whatever its owner wished for until he says stop. Brian was mighty impressed and wanted one for him. The very next day, he saw his mother ordering groceries from an app, and he wanted to know how it works. When explained, Brian exclaimed that the app is the magic mortar he was looking for.Pretty interesting, isn’t it?Little did we realize that we all have a magical tool in our pockets to make our lives easier. We can enjoy the comfort of our home and make everything reach our front door.Yes, you are thinking it right. It is called — ‘Bring it to me’ or simply ‘to Me’ economy.<h2 class="heading-node" id="7a46" style="text-align: justify">So, what exactly is the ‘Bring it to me’ economy?</h2>The products and services are right at your doorstep instead of you getting in your car and going to the store every time. Starting right from fertilizers for your garden to vegetables for sumptuous cooking, you get every item online.Furthermore, ‘time’ has become a valuable currency and today’s customers are willing to bear the cost if it reduces their workload. Also, businesses have started realizing that they need to go a step beyond the digital realm to retain customers. So, front door delivery options have become the new normal.<h2 class="heading-node" id="836f" style="text-align: justify">The Role of Technology</h2>On the other hand, silently, our economy is moving ahead with a plethora of advancements and innovations. Technology is the leading player that drives the rapid economic growth of every country, including ours. With the cool trends springing up every day, shoppers expect more like same-day delivery and technology inclusion into their lifestyle.(i) Financial TechnologyFintech’s biggest contribution to this evolution is the digital money transfer services, as economic growth is highly connected with <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion.</a> Digital wallets were a huge hit to pull many customers to ‘bring it to me’ economy lifestyle. They are widely accepted right from a street vendor to huge shopping centers, which make their transactions quicker. Mobile payment apps and gateways help in hassle-free and secure money flow during transactions. They also assist in tracking and analyzing the customer’s spending habits and preferences to bring matching products and advertisements.<a class="link" href="https://m2pfintech.com/blog/bnpl-the-rising-fintech-star/">BNPL (Buy Now Pay Later)</a> gives the customer the comfort of purchasing their desired products anytime with the ‘pay later’ option. Even Fintechs can now customize loans and insurance for the assistants helping in delivery service. Thus, fintechs helps businesses in building a friendly and personalized approach to the customers.(ii) Artificial Intelligence &amp; Machine Learning TechnologyMany grocers and FMCG companies have started incorporating AI &amp; ML technologies to capture their target segment. The virtual fitting room is the buzz during this pandemic. A customer can virtually try on clothes, accessories, shoes, or watches and check if it fits them in a 360-degree view. Even the shoppers can visualize a 3D furniture model to check if it fits their environment and space before making an order. So, there is a virtual solution to everything using artificial intelligence and augmented reality technologies in today’s digital world.Delivery models like Autonomous ground vehicles (AGVs) with lockers, droids, and drones are state-of-the-art in the regular delivery service with their super-fast and reliable features. AGVs with lockers boost the delivery system even on Sundays and late nights, where human effort is least expected. On the other hand, drones will help in reaching the product (up to 15kg) in the rural areas at a relatively high average speed. Droids are small autonomous vehicles that relatively travel slowly on the sidewalks for doorstep delivery. With these innovations, we are on the way to reduce human intervention in delivery systems.(iii) Blockchain TechnologyBlockchain technology guards the customers’ information involved in the process and avoids any digital breaches and other cyber-attacks due to its centralized nature. It builds the customers’ trust in their privacy and the security of digital assets. It also increases sales and streamlines payment processing with high efficiency.<h2 class="heading-node" id="22e8" style="text-align: justify">What awaits us in the future?</h2>The ‘Bring it to me’ economy has gained its popularity by bringing services home. Be it personal grooming or professional cleaning, or any other service; the customers are ready to avail them.Nowadays, people are redefining their satisfaction based on memorable experiences and interactions. Businesses need to put their heart and soul into providing their best customer experience to reinforce and market their brand digitally.Be it a simple emoji that brings a smile or the level of service offered, businesses are now in a race against themselves to turn their products and customers as their brand ambassadors because the end is not the supermarket shelves but the customer’s doorstep.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.