<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner-1-1.webp" alt="M2P Fintech" title="" width="100%" height="358">Payment Tokenization — One technology to make all the stakeholders of digital transactions happy!<blockquote class="block-node" id="pcv6p2tv7">“Tokenization market worth is estimated to be $4.8 Billion by 2025.”-&nbsp;Markets and Markets</blockquote>Simply put, the word “Tokenize” means substituting, and it is an ingenious concept introduced in 2005 by Shift4payments to protect cardholder data. It factored in data security at its core and is now a popular term due to the surge in online transactions.In fact, a token is a concept that has been long around; for example, the coins that we buy in the gaming arcade or a casino have no value outside the premises. But inside the building, you get to buy your stakes or favorite superhero toy. Likewise, tokens replace or mask the sensitive data in the online transaction by replacing it with random alphanumeric characters.By enabling payment tokenization, the merchants and networks can move data without the hovering threat of payments fraud or identity theft. Tokenization helps in finding a perfect balance between “data security” and “user experience.”<h2 class="heading-node" id="5806" style="text-align: justify">What is ‘Tokenization’ in payments?</h2>In the world of payments, the card account number is masked by a single-use randomized alphanumeric character of the same length. This camouflage is called tokenization in payments. Meaning, each account number is now a ‘Token’ representing the original confidential information. In contrast, the actual data is stored safely in a digital token vault.It is also referred to as ‘Credit Card tokenization’&nbsp;interchangeably. It helps in removing the credit card information from the internal network or database. The concept is more popular with <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit cards</a> as it involves a higher magnitude of the fraud.<h2 class="heading-node" id="8f6f" style="text-align: justify">Why do we need Payment tokenization?</h2>Pandemic fostered digital transactions at a faster pace than ever before indeed. As there is an increase in digital commerce, businesses came up with enhanced solutions that facilitated online transactions to confront consumer preferences.Improved digital transactions put security under question. While the consumers are worried about their sensitive data being visible to many online platforms, the merchants fret about losing loyal customers.‘Tokens — the trustworthy representatives,’ alleviates these roadblocks effectively as the original data (ex: credit card number) never reaches the merchant’s server. The merchants enjoy retaining the customers without compromising the reputation while staying <a class="link" href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/">PCI-DSS</a> (Payment Card Industry Data Security Standard) compliant.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/int.webp" alt="M2P Fintech" title="" id="92tjhlk3p" width="100%" height="358"><h2 class="heading-node" id="aa74" style="text-align: justify">How does Payment Tokenization/Credit Card tokenization work in action?</h2>Tokenization is not a costlier technology as it sounds. Any organization can adopt it irrespective of the structure and size. It is ideal for organizations that cannot afford to spend more on sophisticated encryption algorithms or infrastructure to secure the data.Let’s see an example,<ul class="list-node" id="a9ehiej48"><li>Sara orders a pair of sports shoes on Amazon. After choosing all her preferences, she reaches the payment section.</li><li>She enters the sensitive data on the portal (credit card number, cardholder name, etc.)</li><li>This goes straight to the tokenization server without storing any data in the amazon application’s server</li><li>There are many tokenization providers in the market like Fiserv, Mastercard, American Express, TokenEx, 3D Delta Systems, Meawallet, etc.</li><li>Then it reaches the token vault, where the original data is secure. It, in turn, returns a&nbsp;token&nbsp;of randomized alphanumeric representation of the same length.</li><li>This has no relation to the original data, like in the typical&nbsp;‘data encryption&nbsp;process. The actual data is contained within the ciphered text. Tokens are, in general, generated by mathematical algorithms.</li><li>This token is now passed to the merchant’s acquirer bank, and this bank passes the token to the credit card network.</li><li>Then the card network processes the token and maps it to the customer’s account number, authorizes and passes it to the issuing bank.</li><li>The issuer bank now authorizes or denies the transaction based on the fund balance.</li><li>After the successful transaction, a unique token returns to the merchant.</li><li>Amazon now has no record of Sara’s sensitive original information but her tokens. In this way, Amazon can enable Sara to make one-click payments the next time she shops.</li></ul>It is evident that&nbsp;tokenization checks all the mandates of refined digital transactions. Sara is now happy with her brand-new sports shoes while securing her data in the vault. Getting the data from the vault is not an easy piece of cake. It requires multiple authentication levels, service charges, etc., to verify if a trusted party raised it.<h2 class="heading-node" id="4357" style="text-align: justify">Then it also brings forth the question is Tokenization and Encryption one and the same?</h2>The answer is definitely no.The tokenized data cannot be reversed to reveal the original card number. In contrast, encryption takes a card number, transforms it into ciphertext by running it through an algorithm. To unlock the ciphertext, it has to be decrypted using an encryption key.On the other hand, tokenization uses no algorithm or requires a key to unlock the original data.<h2 class="heading-node" id="b70f" style="text-align: justify">Does Credit Card Tokenization impact a change in the payment process?</h2>No.The end-user will not find any difference in their transactions even after the implementation of tokenization. The entire process happens at the backend without intervening in the user experience. Tokens are generated online and eliminate the need to wait.<h2 class="heading-node" id="744e" style="text-align: justify">Why is Payment Tokenization a ‘Fintech Asset’?</h2>The boom of technology in the Financial services domain has been rapid in the past decade. Card-less transactions, <a class="link" href="https://m2pfintech.com/blog/remittance-with-upi-a-giant-leap-for-cross-border-payments/">UPI payments</a>, <a class="link" href="https://m2pfintech.com/blog/what-is-a-payment-gateway-and-payment-switch-understanding-the-basics-of-payments-architecture/">Payment Gateways</a>, etc., increases online consumers each day. As we enjoy the perks of digital banking with one-click transactions, we cannot deny the fact that our data is vulnerable to “Social Engineering.”Social Engineering is everywhere. We may fall into the trap of hackers and leave a lot of confidential information during digital transactions. There are multiple intrusion points for the hackers to lure in when the transactions float over the network and wipe away our savings.Given this scenario, tokenization is indeed an asset to Fintech. Because even if a hacker tries to sneak into the network, all he can find is randomized alphanumeric and characters with no relation to the original data (PAN number, credit card number, etc.)It is expensive for merchants to become <a class="link" href="https://m2pfintech.com/blog/pci-dss-a-quick-guide-to-its-levels/">PCI DSS</a> compliant and qualify themselves as a trustworthy eCommerce merchant for the consumers. They have to undergo a lengthy auditing process, and it is an ongoing process. With the help of&nbsp;‘Tokenization,’&nbsp;merchants can save a hefty amount of money as the scope of <a class="link" href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/">PCI DSS</a> compliance is reduced in storing the user’s confidential information.Apart from banking,&nbsp;‘credit card tokenization’&nbsp;builds confidence among the investors as it secures the money with ease. We could see the boom of Blockchain technology-based fintech solutions gaining momentum across the nations.&nbsp;“Tokenization”&nbsp;is also seen as the key to drive blockchain implementation in the future by accompanying cryptocurrency transactions.Finally, it also offers substantial benefits to all stakeholders involved in the transaction:<ul class="list-node" id="nexhxh9e5"><li>Issuers witness a notable decrease in payment fraud in both channels of online and mobile transactions.</li><li>Acquirers, merchants, and processors experience a lower risk of accessible, sensitive cardholder data if compromised by cyber attacks.</li><li>Merchants will wield a powerful mechanism that lets them innovate better retail experiences minus the responsibility of storing and handling sensitive data.</li><li>Customers need not enter their details every time they make an online purchase from smartphones, tablets, or PCs.</li></ul>Payments tokenization makes all the parties — consumers; merchants; payment gateway providers, banking institutions, regulatory bodies feel safe, secure, and happy with their buying and selling processes.Tokenizing confidential data makes way for turbulence-free secure digital transactions!<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.

How Does Payment Tokenization Work?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner-2.webp" alt="M2P Fintech" title="" width="100%" height="383">The word <a class="link" href="https://m2pfintech.com/blog/remittance-with-upi-a-giant-leap-for-cross-border-payments/">“Remittance”</a> means money sent to an individual in another place. The Latin origin of the word means “To let go or to send.” As the human civilization evolved, so did remittances. It was earlier a bill payment done via mail or a cheque sent for an appliance purchase. But, today, remittances are a much more complex phenomenon. It is hard-earned money of the immigrants sent back home to their families.Until the last decade, immigrants were heavily reliant on banks or FOREX brokers to relay their earnings back home. It came associated with a hefty fee and a longer waiting time of a week or more. It involved multiple players, the differences in conversion fees, processing fees, and so on.But, then again, over the years, Fintech’s intervention has changed the remittance landscape for the better. The primary advantage is the time taken to send the funds across the border. What takes weeks to complete, Fintech does it in seconds. They have turned the tables by providing competitive exchange rates, which were almost close to existing market rates.They have enabled multiple ways of currency transfers where the remitter can send money via:<ul class="list-node" id="2w6efqopb"><li>Enabling customers to see multiple exchanges fees at one place and then make money transfer within the platform — TransferWise (now Wise)</li><li>Doing remittances in bulk and passing on the savings to the Customers.</li><li>Internet-enabled smartphones</li></ul>The advent of account-linked mobile wallets like Google Pay, Apple Pay, Venmo has brought down the transactional fees to a bare minimum or no fees at all. Meaning all the international transfers happen through an app. They have provided the option for the customer to choose their preferred method of payment, right from the comfort of their homes.In fact, India holds first place in the remittance industry. It has averaged US$76 billion in 2020, despite the general decline in remittance across the globe as per World Bank. The main reason why India is the leading country in the remittance index is because of its large diaspora of expatriate population. It is closely followed by China and Mexico in the second and third places, respectively.Additionally, Fintech has unlocked vast amounts of user data, helping to better understand user behavior. The data provides utmost detail right down to the kind of phone used, frequency of transfers, locations, etc.<h2 class="heading-node" id="57f8">What are Fintechs doing?</h2>From extending reach of their in-app payment and transfer solutions, Fintechs are evolving how the age-old Exchanges have been working. While tying up with Banks and Exchanges in regions like GCC and executing remittances on their own in regions like the USA &amp; Europe.<ul class="list-node" id="fq5idmmwt"><li>Extending Banking to the Unbanked:</li></ul>The Fintech catering to low-income-income migrant workers, primarily in the GCC, provides them with solutions like debit cards, bill, payment, and mobile top-up facilities in-app. These fintech players are extending banking to the unbanked, giving them proper accounts, shopping online, and building their credit histories. Such customers’ data will further help them roll out services like Insurance and Credit (loans). — NOW Money<ul class="list-node" id="8v0gg4syi"><li>Blockchain-Powered Digi-wallet:</li></ul>Fintech players are taking remittance to another level where cash is converted as <a class="link" href="https://m2pfintech.com/blog/central-bank-digital-currency-cbdc-101-a-primer/">digital currency</a> using blockchain-powered Digi-wallet. The money can be transferred to anyone having the wallet app installed (more like Intra-app transfer) using this wallet. They further create an ecosystem where the App’s user can do transactions anywhere, without even considering converting the digital currency to actual currency. — MenaPayWith <a class="link" href="https://m2pfintech.com/blog/the-rise-of-digital-payments/" target="">digital payments</a> shrinking the world, transferring money across borders is now the new normal. New-age Fintech is constantly innovating the best practices to offer enhanced transparency while maintaining high-level security.<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.

How is Fintech revolutionizing Remittances?

&nbsp;<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner.webp" alt="M2P Fintech" title="" width="100%" height="529">Decades back, our banking systems were massive local servers poised at a physical location of a bank. The conversation between branches happened only at a specific time. Any transactions that occurred after were reserved for another day.The local servers handled the heavy load of deposits, account openings, loans, and credit processing in its designated area. So, going to the bank to avail these services required planning downright to its every tiny detail.Fast-forward a few decades, banking has taken a its digital avatar where traditional banks and new-age neo banks compete for customer attention and retention. Traditional banks are now making the hard choice of restructuring the legacy systems. But, they face the unique challenge of data management and processing.Just to render swift and intelligent services, they need to leverage analytics, break down data silos and restructure data according to the needs of the business. The vast amount of data generated brings the points of scalability and flexibility into focus. It has driven banks towards a service-based delivery model.The primary challenge that banks face is in consolidating data and offering contextual banking. The legacy systems are often limited by performance and horizontal scalability. They also have a minimal understanding of polymorphic data handling capabilities.This is where APIs come to the rescue; as banking is a global transaction exercise, they seamlessly integrate as a plug-n-play platform. With <a class="link" href="https://m2pfintech.com/blog/neo-banking-101-all-you-need-to-know/">neo-banking</a> and <a class="link" href="https://m2pfintech.com/blog/open-banking-a-primer-2/">open banking</a> on the rise, <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">banking APIs</a> offer the following benefits:<ul class="list-node" id="78x0lme2c"><li>Multiple platform data aggregation and gain a higher share of target customers</li><li>Enhanced operational efficiencies with automated processes</li><li>Niche digital user experience</li><li>Potential to scale complex operations with minimal effort</li></ul>Many banks have integrated APIs as microservices and adapt cloud-based processes whilst reducing their dependency on the core banking system. Furthermore, APIs have helped improve a bank’s or any financial institution’s native service and offerings.To sum up, APIs have enhanced banking services and have helped craft a user-driven experience that focuses on experiential generation.<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.

Transactional to experiential banking- The Paradigm Shift

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner-1.webp" alt="M2P Fintech" title="" width="100%" height="529">On April 7, the Reserve Bank of India made several key announcements concerning <a class="link" href="https://m2pfintech.com/blog/disruptive-business-enablers-prepaid-payment-instruments-ppis/">Prepaid Payment Instruments (PPIs)</a> at the Monetary Policy Committee (MPC) meeting. These measures could potentially impact the banking/FinTech sector and bring about changes in Digitalization and <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">Financial Inclusion.</a><h2 class="heading-node" id="04b0" style="text-align: justify">Interoperability of digital wallets is now mandatory</h2>All full-KYC PPIs and Payment Acceptance Infrastructure must be compulsorily interoperable.<a class="link" href="https://m2pfintech.com/blog/why-payments-interoperability-is-a-must-for-todays-generation/"> Interoperability</a> through <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> among digital wallets was already achieved by RBI back in 2018, but it wasn’t a very widely used method for payment transfer. Now to extend the reach of digital rails, interoperability through UPI or otherwise, has been made a mandatory feature.<h2 class="heading-node" id="b0ff" style="text-align: justify">Increase in permitted outstanding balance</h2>A payments bank can now raise the limit of the end-of-day balance to INR 2 lakhs (previously INR 1 lakh). This move is to incentivize PPIs to move to a <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">full-KYC</a> structure and interoperability. The new move is expected to encourage financial inclusion of a wider customer base.<h2 class="heading-node" id="eda2" style="text-align: justify">Cash withdrawal from digital wallets</h2>Digital wallet holders can withdraw cash from their prepaid wallets at ATMs and/or swipe to pay at retail establishments. Previously, cash withdrawal was allowed only for full KYC PPIs issued by banks. The recent move brings uniformity among PPI players and bolsters the banking infrastructure, particularly in underserved areas. Bringing wallets at par with Bank Accounts in terms of service offering.<h2 class="heading-node" id="d9bb" style="text-align: justify">RTGS and NEFT enablement</h2>It is proposed that PPI issuers, card networks, White Label ATM operators, and Trade Receivables Discounting System (TReDS) can now take membership in CPS (Centralized Payment Systems) and access Real-time gross settlement (RTGS) and National Electronic Funds Transfer (NEFT). It was previously restricted to banks. This move is expected to improve the services of PPI issuers to their customers and minimize settlement risk.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/image.webp" alt="M2P Fintech" title="" id="tbptd8z27" width="100%" height="529"><h2 class="heading-node" id="3a06" style="text-align: justify">What does it mean for the Banking sector and FinTech?</h2>Through these recent announcements, the RBI has opened up the extent of Banking services, to larger FinTech players. It is expected that this move will help relieve stress on traditional banks that cater to a wide base with limited legacy technology.FinTech players can take over the load, offer banking services (except credit offering) on par with traditional banks, and penetrate underserved areas of India. It will further increase the penetration of digital payments in the country especially the Tier-3 to Tier-6 centers. According to RBI, these new guidelines will promote the optimal utilization of Payment Instruments like wallets, cards, etc. as infrastructures such as PoS devices, ATMs, QR Codes and Bill-payment touchpoints are still scarce.Though banks will continue to handle the crucial aspect of lending, it will be interesting to see how PPIs, wallets, and other payment systems will now compete in the banking ecosystem. It will be an evolving process for Fintech companies who are partnering with the PPI license holders to issue co-branded prepaid cards for providing loans to their customers. The array of services that these FinTech’s offers will diversify and they will be able to ensure user satisfaction by providing <a class="link" href="https://m2pfintech.com/blog/neo-banking-101-all-you-need-to-know/">Neo-banking</a>-like facilities.These announcements acknowledge the capabilities of FinTech players and the gaps in the system that they can effectively fill. This is also an endorsement of the enormous potential of the industry. It remains to be seen how payment companies ride this wave, innovate, and offer end-customers seamless payment experiences.<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.

RBI’s new guidelines for PPIs. How will it impact the FinTech industry?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Artboard-1-copy-7-1-2.webp" alt="M2P Fintech" title="" id="5dyid3ffz" width="100%" height="356"><h2 class="heading-node" id="bf40">Welcome to Team M2P Star Highlight</h2>This month, we are unraveling the hidden facets of our ever-elusive genius Kurukshetran or Kuru (as he is fondly called by his colleagues). Known for his quiet and observing nature, Kuru is a dedicated developer who also dabbles in part-time game development.When discovering Kuru’s facets, we also realized that he is a hopeless romantic. He had serenaded his love interest with the songs of the Maestro Ilayaraja. With a vision to build his own Startup, Kuru shares his aspirations, inspirations, and ambitions in life right from untangling a complex code to his journey in <a class="link" href="https://m2pfintech.com/">M2P</a> so far.<h2 class="heading-node" id="d349">What is your job, and how would you describe a typical/busy day at M2P?</h2>Officially a developer but a game nerd, I handle code development and product integrations. One of my primary responsibilities is to write and iterate the code that completes the puzzle. I also handle a team of four and monitor the code progress. Our core systems are my specialty, and I can answer any queries that arise on the same with my eyes closed. My typical day at M2P starts with our team meeting, answering any emails or queries that have risen from the client or bank, and monitoring our product integrations.Along with other team leads, I often get into discussions about code, and brainstorm solutions. I have a candid chat regarding any random conversations that pop up on our radar. On a busy day, the routine remains the same, but you will find me and the team huddled in the conference room discussing the ways to sort out the issue.<h2 class="heading-node" id="e45b">Did you always want to be a developer, and how did fintech become a part of it?</h2>Mostly, yes. I wanted to be in this field primarily because of my Uncle. He is a technical architect and is almost a walking Wikipedia in his domain. His enthusiasm and passion inspired me to choose this field. Coming to the fintech part of the question, I actually kind of stumbled into it. Game development was my focus, but due to a couple of setbacks in college (laughs it off), I worked as a temp in many companies. Through a common friend of my father’s, I got placed in M2P as a full-time employee and to date has been…<h2 class="heading-node" id="0f0a">What was your first challenge in M2P?</h2>I faced my first challenge in <a class="link" href="https://m2pfintech.com/">M2P</a> during the sixth month of my employment. I had to simultaneously get certified and build a solution for the MasterCard Switch. I didn’t have much insight about MasterCard protocol or the TCP/IP working during those initial days. Also, MasterCard was placed in Singapore; I had to come into the office early, say by 5 or 6 am, which was quite a big challenge for me as I was never an early bird. But, I am proud today to say that I conquered the challenge in a month as opposed to the stipulated time of 2 months. During that process, I got a better insight into the fintech domain and how my role as a developer plays an important part.<h2 class="heading-node" id="3fb5">What is your personal satisfaction with this job?</h2>Continuing from my last answer, my personal satisfaction in this role is that I enjoy complete autonomy. Our company founders have given the concept of ownership to each and every individual in the company. I don’t need to feel apprehensive while putting forth my solution or thoughts. They are welcomed. My personal feeling is that I am working in my own company. That’s the freedom my lead has given me in terms of the technical perspective.<h2 class="heading-node" id="340c">What will you like to do outside of M2P?</h2>Before coming to M2P, I used to go to my Uncle’s office and try to understand development’s nuances. They were primarily into game development. I observed them and understood their working methodology, right from their thinking process to the tools they use to launch a game. Based on those observations, I will try to imitate the game build. For example, I modeled a game after Super Mario, and it is now in its 2D form. I mostly mimic the gaming mechanics. Game development is my passion, and I am also a part-time gamer. You will often find me experimenting in both.<h2 class="heading-node" id="1f3a">What’s something that most people don’t know about you?</h2>I am a hopeless romantic and a die-hard fan of the Maestro Ilayaraja. I relentlessly pursued a girl during the four years of college. Then, one day I worked up the courage to propose to her. I came to the college early, by 7 am, and with my friends’ help, I decorated the classroom with flowers and streamers. I burned a list of Ilayaraja’s most romantic songs on a DVD and played them as she entered the classroom. Sadly, she never said yes or no but left me clueless till the final year.<h2 class="heading-node" id="20b3">Is there any difference in the way you work pre and post-pandemic?</h2>No, not much, actually. I have always been a self-motivated person and like to finish my work on-time. The only difference I see is the absence of the office’s physical presence and working with my colleagues. But I have improved myself a lot during this lockdown. I have enhanced my language and communication skills.<h2 class="heading-node" id="7e5f">What would you love to build/develop if you have unlimited resources and time at your disposal?</h2>I have already done, I think. I have used Machine Learning techniques to build a signature Video KYC solution. This COVID-19 had brought forth a unique solution for account openings: video KYC, and I was intrigued by it. I wanted to build a better version of it and have used AI-ML techniques to build a crude version, and it is still in the works.<h2 class="heading-node" id="0605">Anything else you want to share?</h2>When I came to<a class="link" href="https://m2pfintech.com/"> M2P</a>, I was basically an individual contributor, and all I thought was that my job is just coding. But, today, I have learned managerial and leadership skills that have molded me into a better person.<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 our Tech G(K)uru

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-7-11.webp" alt="M2P Fintech" title="" id="hwrpiz4dg" width="100%" height="317">Often, the country’s self-employed and underbanked section shies away from accessing formal credit lines as they do not satisfy the banking formula. Traditional financial institutions staunchly rely on asset-based lending where they have an asset to fall back on in case of default. But, it ignores those millions of potential borrowers who perhaps are viable choices than salaried defaulters.Also, the on-going pandemic has forced many industries to shut down their business. With the economy slowly getting back-up, these segments are still in search of funds. In the absence of credit scoring and strong financials, scores of MSME and SME’s have succumbed to high-interest loans or credit flow decline. But coupled with the right tools and innovation, cash-flow-based lending can help revive them.Nevertheless, the landscape is now slowly shifting, with many upcoming FinTech's and NBFCs focusing on cash-flow-based lending. Cash-flow lending takes into account the revenue generation capability of the individual/enterprise based on various factors such as seasonal or market demand. The interest rates and tenure of the loan are adjusted accordingly. This method of lending doesn’t come under the regular pattern of 12-month EMI repayments.<blockquote class="block-node" id="ivntz2hml">Inspired by the country’s FMCG sector’s ingenious move, this movement is termed “Sachetization,” where good things come in small doses.</blockquote>Sachetization was spurred off by India’s FMCG sector to capture all facets of the market. They realized that the significant market shareholders were not the ones who could not afford large-ticket items in a single purchase. Starting from shampoo packets to instant coffee, sachetization has a long-standing relationship with the Indian economy. Now, P2P lending has also adopted this model through the means of cash-flow-based lending.For example, with data insights and cash-flow lending, a farmer can take out loans to reap a better harvest. He need not pay the usual cycle of 12 months but rather avail a customized loan with a repayment tenure based on his crop production. The same formula can be tailored to a different set of customers like fishermen who has an off-season of 4 months due to the monsoon.Many financial service providers are now partnering with new-age FinTech's to offer sachet loans to their target customers. They are currently restructuring the formula by deploying technology to better understand the MSME/SME’s financial needs.In a nutshell, making cash-flow-based credit available to every segment will be a small solution that has the ability to spearhead complete <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion</a>.<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.

Sachetization inspired cash-flow lending

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-7-1-3.webp" alt="M2P Fintech" title="" id="1rpwrq7ge" width="100%" height="447">Like every other English, the term over-banked has its share of meanings:<ul class="list-node" id="23k37tfcl"><li>It denotes a place with an excessive number of banks.</li><li>It also indicates people with too many bank accounts.</li></ul>But the true meaning of the word is that your watch is malfunctioning, and you need to get it repaired.Coming back to the people’s perspective of the overbanked, they are the ones who are financially literate with efficient money management skills. They get the most out of their bank accounts as banks operate on a minimum balance model with numerous benefits for every account category.In countries like the USA, the overbanked often rely on sites like Mint.com, Personal Capital, or LearnVest to manage all their accounts in one platform. They can oversee and make decisions while having a 360° view of their financial activities.In fact, one of our customers, Finin, a Bengaluru-based startup and India’s first-ever neo-banking platform, offers the functionality of viewing different bank accounts aboard their platform. They offer account aggregation, bill and subscription management, smart budgeting, and goal-based saving.With all bank accounts in one place, the app would understand the bill, subscription, and EMI cycle of the consumer and tell you what your future expenses will be. The initiative is to build a savings first consumer-focused <a class="link" href="https://m2pfintech.com/blog/neo-banking-101-all-you-need-to-know/">neo bank</a> that will collate the many concepts related to wealth management into today’s Fintech scenario.Such apps would take what is known as a&nbsp;“Nudge approach,”&nbsp;where it will alert you about your spending behavior. With Artificial Intelligence and Machine Language, an individual’s saving and spending behavior is also understood, thereby providing a hyper-personalized service.The Overbanked tend to make decisions based on how much they gain; thus, the “relationship” with an institution is usually dismissed. This is where FinTech's use hyper-personalization as a hook to reel in today’s millennials. They aim to create an incredible user experience for the overbanked with financial literacy and freedom at its core.<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.

Why do the overbanked need Fintech?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner-1251-2.webp" alt="M2P Fintech" title="" id="g4x9lr2sv" width="100%" height="479">Bridging the shortcomings of traditional banking through integrated value chains and regulatory requirements, <a class="link" href="https://m2pfintech.com/blog/neo-banking-101-all-you-need-to-know/">neobanks</a> today offers a holistic twist to banking services. User-friendly and completely digital, these banks work on referral-based acquisition and competitive pricing.With no banking license of their own, neobanks partners with traditional banks to offer their service suite. While this might be a pain point, neobanks target niche micro-segments like the Gen-Z because of their higher transaction volumes. Coupled with Data Analytics, neobanks bring forth innovative solutions to help individuals keep better track of their finances.For instance, our client Finin, India’s first neo bank, has brought on a feature where users can have a unified view of their bank accounts via their platform. It helps a user to keep better track and plan their financial journey.<h2 class="heading-node" id="27ed">Unbundled Banking</h2>Neobanks today are focusing on offering one type of product/service with complete functionalities. They operate with customized tech stack modules aimed at niche segments with user convenience as the focal point. Some of the top global neobanks are Revolut, Monzo, WeBank, Chime, etc.Paradoxically, legacy banking institutions cannot create these experiences as they face redundant processes, <a class="link" href="https://m2pfintech.com/blog/why-payments-interoperability-is-a-must-for-todays-generation/">interoperability</a>, etc. Fintech professionals realized that an obsolete technology stack was limiting the interoperability of traditional banking. This, in turn, guided the notion of Unbundled Banking, with neobanks steering the helm.Unbundled banking further narrowed that focus on customer experience, user convenience, and simplified processes. In this approach, anyone can launch banking products minus the need to go through a rigorous process of setting up a bank.<h2 class="heading-node" id="d0fd">Neobanking Revenue Model</h2>Neobanks operate on a strong cost-efficient model backed by less complex IT systems. So, their revenue model depends on the kind of products and services offered by them. Cross-selling of products/services to niche customer segments also acts as a secondary revenue stream for neobanks.They are driven by data-based decisions that depend on a decision-making model. Neobanks gather consumer data and analyze them and predict consumer behavior. These predictions help to offer customized services to their target customers. By deploying AI-driven chatbots, video chats, and data analytics, neobanks are available to customers as a cost-effective banking service right at their fingertips.Neobanks cross-sell and generate secondary revenue streams with a range of customized offerings suitable to customer’s needs. They also offer payments and accounts back-end platforms for other fintech companies to build their own interface on top of it.<img src="https://miro.medium.com/max/1400/1*ccQft1zHg2RQupLqXoK1YA.png" alt="Neobanks’s revenue model" title="" width="100%" height="306">Plug and Play solutions with 3rd party service providers with ease and data insights. With this, they can offer a range of products and services based on customer appetite and financial goals to boost up the secondary revenue lines and opportunities for cross-selling.&nbsp;Boosting lending options to customers and the SME sector will help generate revenue options.<h2 class="heading-node" id="6d68">Neobanks &amp; the less-digitally savvy users</h2>The audience that comprises this segment is often elderly and rural customers; capturing their trust is quite an uphill task for neobanks. They gain such customers with a free account and low fees and budgeting tools and cash projections based on past spending, and ‘savings pots’ for spend categorization. Offerings like High-Yield Savings Accounts and easy money movement through lower fees &amp; charges are some ways.Neobank growth can be accelerated through adaptable services and convenience in money transfer like cheaper lending rates and better rural audiences’ products. Creditors can choose borrowers and information from diverse sources and technology-based lending.&nbsp;Like how social media platforms have pulled in rural customers, neobanks also need to create awareness through their user-friendly applications.Reduced data rates &amp; smartphone prices will also encourage rural customers to use neobanking apps and gain trust.<h3 class="heading-node" id="e927">Neobanks &amp; Transparency</h3>The issue of banking transparency is closely linked to <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion</a>. Neobanking transparency can be improved through dashboards, reports across products with enhanced interfaces, and easy-to-understand services such as payments, payables and receivables, and bank statements. They must explain real-time notifications, any charges, and penalties incurred by the customer too. They should send instant alerts to customers to know exactly what is going on with their account.<h3 class="heading-node" id="2fb2">Security &amp; Privacy</h3>Neobanks were the primary users of security-enhancing models. These were MCC block, single-use <a class="link" href="https://m2pfintech.com/blog/all-you-need-to-know-about-virtual-cards/">virtual cards</a>, and tokenized online transactions. They rely on security and safety when designing platforms, like data localization or 2-factor authentications (2FA) for card-based transactions.Neobanking enables third-party financial service providers (TPPs) to access customer data from banks or financial institutions. They must maintain robust online anti-fraud systems and inform customers of breaches as soon as it happens.Customer permission is required to ensure data privacy or share certain information with banks or providers. For instance, if the customer gave consent, they can share financial data like spending habits and regular payments with other banks.Providers must comply with <a class="link" href="https://m2pfintech.com/blog/gdpr-in-a-nutshell/">GDPR regulation</a> and data protection rules. They must provide transparency on how and for what the data will be used, for how long before they get a customer to sign up.<h3 class="heading-node" id="04ca">Trust</h3>Neobanks have strong drivers for securing their customers’ accounts, which are reputation management &amp; consumer perception. Developing trust can also be a challenging factor for loyal traditional banking customers.&nbsp;Fines, data breaches, and attacks can significantly damage consumer trust in non-traditional banks. Therefore, neobanks must protect consumers from mobile Trojans phishing scams and account takeover attempts. They can earn consumer trust through advanced authentication concepts such as dynamic linking, device binding for mobile apps, mobile application shielding, and transaction risk analyses.Strong privacy and data protection policies like removal of hidden fees and charges can help build consumer confidence in neobanks.<img src="https://miro.medium.com/max/1400/1*0VH_WhJDpgy4AEpgB9ivEA.png" alt="Advantages of Neobanks" title="" width="100%" height="306">Neobanks are trying to simplify the ways of transacting through digital mediums through:1. Simplified process with minimum steps to complete with minimum redirect for the transaction/payment 2. Tightly tying up and different players in the ecosystem (Retailers, Digital Service Providers, Issuer and Acquirer banks, etc.) 3. Standardization across devices and internet browsers 4. Compatibility across platform and technologies 5. Educating conventional customers on digital payment and ensuring that money is safe.<h2 class="heading-node" id="1e23">Neobanks Vs. Traditional Banks</h2>Traditional banks are focused on product-centric models, meaning high verticalization of products, no strong communities built around the brand/product, increased customer acquisition cost, and legacy technology infrastructure.But currently, traditional banks have been increasingly offering unique products and services to customers. One might wonder how neobanks will continue to differentiate themselves from conventional banking as a result.Neobanks can tackle product competition by keeping the focus on a platform-centric model. For example, high community engagement with the product, product horizontalization with best-in-class apps, open-banking APIs, and capitalize on a mobile-only approach for the low customer acquisition cost. A lower dependency on 3rd party providers and real-time data integration and management might help too. Above all, customer-centric organizational design and customer needs to drive data architecture.Neobanks create an ecosystem of services around their infrastructure, shifting the banking value from branches to their <a class="link" href="https://m2pfintech.com/blog/the-world-of-apis-how-they-power-fintech/">API</a> layer.&nbsp;They expand their user base by providing services on a 3rd party platform or offering 3rd party services on their platform.The neobanks’ value propositions &amp; CLV is based on lower costs, personalized insights, predictive intelligence, user-friendly interfaces, easy accessibility, and simplified processes.<h2 class="heading-node" id="17cf">The Global Way Forward</h2>On a global scale, neobanks are on an upward growth trajectory in Europe, followed by America. The real neobank growth is being unlocked in the APAC region, with many countries devising their virtual banking systems.Hong Kong, Taiwan, and Singapore have already implemented virtual banking licensing, with Thailand and Malaysia following suit.In India, neobanks are still nascent. Still, they are playing a leading role in helping small businesses to manage finances conveniently and comprehensively. The data below shows that the Indian neobanking market is growing fast:<ol class="list-node" id="701721vxm"><li>Average market maturity of India is 2–3+ years compared to 5–6 years+ in Europe and the US.</li><li>Number of neobanking players in India has gone up in the recent past compared to global markets.</li><li>Fund raised by Indian neobanks have gone up to $168 million</li><li>Indian neobanks are boosting up the competition through value-added services apart from standard offerings.</li><li>Indian Government supports the MSME sector through different schemes that open up Indian SME neobanks opportunities.</li></ol>Neobanks are expected to explore strategic partnerships with&nbsp;established traditional banks to grow in India. The Reserve Bank of India (RBI) has not permitted a digital license to neobanks yet. RBI has initiated the change by providing a license to small finance and payment banks, to begin with. Banking Industry experts are hopeful that RBI will also work on policies to approve banking license for digital-only or neobanks soon in the post-covid-19 era. This will keep the fate of neobanks blurry.<h2 class="heading-node" id="c577">Conclusion</h2>Fintech will continue to push neobanking as the new normal. The pandemic is just a catalyst to ignite the digital transformation. Neobanks are challenging mainstream traditional banks. They are backed up by digital backing licenses and control most of the value chain from front-end to back-end.Till then, neobanks in India will have no option but to continue partnering with the traditional banks to offer services.<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.

Neobanking - The Rise of New-age Banking

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/banker.webp" alt="M2P Fintech" title="" id="45u491evk" width="100%" height="356">It was a much-awaited holiday season and the beginning of the new year. Without any surprise, the entire <a class="link" href="https://m2pfintech.com/">M2P</a> team was geared up and raring to go! As we started interacting with our colleagues to know more about them and their teams, here’s what we got, an impromptu interview with our Accidental Banker, Vivek.Engineer by education and Banker by profession Vivek Prashanth has deep expertise in branch banking, managing alternate payment channels, liaising with program partners, and working with card networks. With an innate flair for constant learning and as a curious person by nature, he made a pivotal shift to Fintech just to experience the best.As he treks his program management career, he realized the technological facets of modern financial organizations. He sees what it is to be in the world of API-led banking or payments and to be in a new role of program frontrunner. So, let’s see how he describes his journey with M2P and how it helped him discover his hidden expertise and celebrate his realm of interests.Before that, a small gold pick for your read! Vivek is a dedicated family man and an avid cricket fan who gets up early in the morning just to see a perfect square cut or a jet-speed Yorker.<h2 class="heading-node" id="36c6">So, what brought you to M2P?</h2>As a client, I partnered with <a class="link" href="https://m2pfintech.com/">M2P</a> for a QR payment project. During those interactions, I got to experience the work-culture prevailing at M2P and got inspired by the same. It was also a happening start-up, which offered loads of cross-functional learning opportunities and more choices than banks and other traditional roles do. And again, I was quite interested in working in a fast-paced start-up environment, and M2P was a perfect fit.<h2 class="heading-node" id="4b82">I heard that you’re the one behind every program that runs on the M2P platform. So, what’s your role at M2P, and what’re some of your key responsibilities?</h2>Here at M2P, I lead the operations from banking, card ops to finance operations. Managing BAU (Business As Usual) and providing post live support to banks and partners are some of my primary responsibilities. For instance, once a program goes live, it comes to my radar. From then on, I manage the E2E (End-to-End) lifecycle from accounting, reconciliation, and settlement to customer service.<h2 class="heading-node" id="6743">Any favorite project at M2P, and why?</h2>In fact, my first assignment happens to be my favorite project. We were building a Forex product with YBL, and I was the go-to person for new products like cross-border payments at that time. And I am happy and fortunate for the chance to lead the same!<h2 class="heading-node" id="93c5">Is there any difference between working in a bank and working at a fintech?</h2>Yes, absolutely. Firstly, you get more insights into the Fintech industry. Secondly, there are umpteen and unique learning choices that traditional positions might not or cannot offer. Banking by itself has a lot of restrictions that limit your latitude widely. Thirdly, when you are in this space, you understand how technology, business, and other back-end banking systems work. It is not only about being in a program partner role; actually, you are on the other side of the hustle, interacting with clients and business executives. Not only could you receive requirements, but also see how the product shapes up from scratch and through its lifecycle.<h2 class="heading-node" id="930f">Having said that, what’s the most exciting thing about working in the banking and payments sector?</h2>The evolution of banking and payments is something that fascinates me. New product development and different use cases in the payment sector that solve niche challenges make it even more enjoyable. By working in this domain, we could make an impact.<h2 class="heading-node" id="9379">If you want to highlight what M2P means to you, what would it be?</h2>M2P is like a must-be-cherished soundboard for me. Indeed, it has taught me flexibility, role diversity, and growth. Agility, quick turn-around, and instant product roll-out are three phrases that accurately capture the essence of M2P. Significantly, the pace at which a solution gets formulated, designed, and delivered is quite impressive.<h2 class="heading-node" id="586a">What’s your preferred working style or culture?</h2>As I said earlier, in an environment like M2P, agility and dynamics are inevitable elements. To nourish the same, I prefer not to confine myself to a fixed routine but often set or reset priorities keeping flexibility in the nearshore and schedule workdays around projects!!And usually, I don’t opt for rigid timelines. Instead, I would list the tasks at hand, approach folks to plan a timeline for the project, and motivate the team to commit to the deadline. This approach, indeed, builds accountability within the group. By pushing them to explore and pursue new projects, I allow them to learn something new and implement something incredible beyond their comfortable palette.<h2 class="heading-node" id="d2f6">What skills have you best mastered over the years?</h2>As a banker, I have been working with and managing large teams for a while. So, without a twist, team management is one of my strengths. Other competencies include developing professional rapport, effectively communicating and negotiating with cross-functional groups, engaging customers, and rendering them quality service. At M2P — I have fortunately had the full vicinity of how a back-end banking system works.<h2 class="heading-node" id="c5f5">What fascinates you about payments and the work you do?</h2>It’s an evolving industry. The business, products, and everything in the company is changing. It might be a regulatory change or a newly coming out company or a product that brings something new to the ecosystem. It is happening and fast-moving. These developments motivate me to learn more than whatever we know now, as we might get outdated in a month or two.<h2 class="heading-node" id="7028">Tell us anything about you that we don’t know?</h2>I don’t usually sugarcoat anything! Sometimes I may not sound like a soft-spoken person since I’m a reality checker. I was a zonal level runner-up for volleyball and badminton. I listen to music a lot, especially lyrical melody music.<h2 class="heading-node" id="5651">How do you keep yourself updated about payments and card transactions?</h2>I talk to people, especially in M2P. When you talk to people, you get to know about current affairs. When you talk to clients, you get to know about the industry and how it works. I do read, but maybe not that much. I get more information from people than paper.<h2 class="heading-node" id="b8ba">How do you motivate your team?</h2>Firstly, Learning is one thing that I always look for. So, I insist my team members to keep learning and rise above themselves on every possible occasion.Secondly, you have to talk to them, empathize with what they’re going through. Regarding their career and growth, you have to push them by saying, ‘You can do it!’. I will let them figure it out themselves, revert to me for any show-stopper, guide them in the right direction, and provide resources.<h2 class="heading-node" id="5138">How have influences like Bill Gates influenced you as a banker?</h2>To be frank, I got influenced by our company founders rather than thought leaders. This is because they have achieved great heights, starting from a humble background and always value family and culture.<h2 class="heading-node" id="30c9">One favorite memory after joining <a class="link" href="https://m2pfintech.com/">M2P</a>?</h2>One was the elevation in my career last year. Second is when we go out to meet clients or to a bank, people recognize me. Those moments are my cherished memories!<h2 class="heading-node" id="6fd2">Three words to describe Vivek</h2>Organized, shrewd, and bankable<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.