Forget Apple Pay: India’s big banks are getting into mobile payments

Let’s get all of these guys off cash. Photo credit: Low Jianwel.

Government-run State Bank of India (SBI) – one of the country’s “big four” banks – announced this week it’s working on a feature that will let customers use credit cards directly from their mobile phones when paying for things in stores.

It’s similar to Apple Pay, which hasn’t launched in India.

ICICI Bank also made a similar move, launching a phone app that will allow its customers to make cashless payments.

Both these features will run on host card emulation (HCE) technology, which is a technology for Android phones that allows near field communication (NFC). With NFC, two different devices can communicate – usually for things like file transfers or cashless payments – just by being within two inches of one another.

See: Indian banks and fintech startups are making friends

And yet, the real challenge with going cashless in India is solving the retail hardware problem. Few cash registers in stores have the capability to accept NFC payments.

In fact, the only type of hardware that’s managed to successfully penetrate India’s financial landscape is mobile phones.

This is where payment wallet apps have an advantage. Most use PIN numbers or scannable QR codes so that customers can pay merchants.

Indian startup FreeCharge said yesterday that its digital card initiative, FreeCharge Go, crossed the 1 million user mark. It’s a partnership with Mastercard, giving FreeCharge users a 16-digit number and an “m-pin.” The m-pin needs to be entered by both the merchant and the customer during a transaction, and relies only on the fact that both parties will have phones.

Rival Paytm made payments between merchants and customers free last month. It uses a pre-printed QR code to process transactions.

See: India makes an ambitious move toward a cashless society