Contactless payment system which was there initially in closed-loop system of single vendor has existed for a number of decades though it is only in the recent days when contactless cards had started enjoying wide adoption worldwide. The year 2015 is already seeing a very strong growth of contactless cards and mobile payments applications, though Diakos et al. (2013) argues that this rise has been from a small base to somehow slightly small base.
Hence, he suggests that there need for marketing and education so as to increase public awareness on contactless payment system. There exist a plan by the banks to transfer this kind of services across the whole country. While giving his comments on Contactless technology, the executive director of one of the largest Indian Banks did illustrate that this kind of given initiative is likely to provide a new digital solution which has been made different in replacing cash in all the frequent and small kind of payments that are usually made through the counter (Australia sees first contactless mobile payments trial, 2008). The kind of service in this case is aimed at offering all the users a kind of experience which is not paralleled in making transactions which are quick and secured like buying a meal in a hotel by simply tapping at the phone or the NFC tag (Diakos et al., 2013).
The usability of contactless payment system is very wide since it give room for customer of any given bank to make a registration of Tap and Pay without making a visit to any branch or doing documentation (Diakos et al., 2013). In addition to that, contactless payment is likely to ease the day to day frequent hassle of handling cash and the issue of changing currency on the side of the merchants. (Kubendran, 2015). Research objectives
The main objective of this study is to undertake critical analysis on the possible impact of Contactless payments in India.
Specific objectives
Based on the above broad objective, these study seek to address the following specific objectives:
1) Undertake critical analysis on major Impact of Contactless payments on GEN-Y spending in India
2) Undertake critical analysis on major Impact of Contactless payments on Service sector spending in India
3) Undertake critical analysis on major Impact of Contactless payments on Tier 2 cities, where card usage is low.
Research questions
Regarding the above study objectives, this dissertation seeks to answer the following research questions:
1) What are the major Impact of Contactless payments on GEN-Y spending in India?
2) What are the major Impact of Contactless payments on Service sector spending in India?
3) What are the major Impact of Contactless payments on Tier 2 cities, where card usage is low?
Hypothesis
1. Ho: There are no major impacts of Contactless payments on GEN-Y spending in India
2. Ho: There are no major Impact of Contactless payments on Service sector spending in India
3. Ho: There are no major Impact of Contactless payments on Tier 2 cities, where card usage is low
Literature Review
Adoption of contactless payment system
The logic behind applying contactless payment in making some kind of payments which are in-store has been recognized for a long period of time, and as early back as the year 1990s the prototypes of the equipments used for vending that were designed to take payment through the use of mobile phones and also via cellular networks were being done for exhibition during the events of trade shows on modern technology (Visa brings contactless payments to Europe as it unveils Visa payWave, 2007). The benefits that are associated with applying short-range kind of technology which is wireless through a distance which is of a few centimeter to undertake transmission of information regarding payment has also been fully understood for a long period of time (Diakos et al., 2013).
The first initial device for contactless payment, widely known as Speedpass (a major fob that is normally applied in the gas stations) was introduced for the first time in the year 1997 (Kubendran, 2015). Within the same year, the metro system of Hong Kong did introduce a kind of fare collection system which was contactless. It is indeed true that a combination of mobile phones and contactless payment has been there for more than ten years. The first and initial phone that was having contactless kind of technology were introduce into the market in 2004 and the initial cell phone having NFC went for selling in 2006 (Kubendran, 2015). For quite a number of years, Smartphones has always been utilized in doing financial operations for instance, in money transfer, checking of balances, and online transactions.
It is however important to note that the application of phones in making contactless payment has been quite low prior to 2015, with only a very small proportion (around 10% or even lower) of the smartphone base putting a claim that they had made some kind of contactless payment through their phones. The transactions involving payment cards in India in the year 2010 did total to around 191 billion pounds out of which the pay now cards did comprise of 178.7 billion pounds. HDFC Bank and ICICI Bank have been reported as the two greatest players and are together holding more than 55 percent of the credit card market (Diakos et al., 2013). Banks found within the public sector consist of the largest players in the pay now market in India. The three largest banks that are privately owned are holding 21.1 percent of the total market share while banks that are foreign owned are reported to be having the smallest market share of debit card. The online system of payment in India was at 4.2 billion pounds in 2010, majorly as a result of the slow rate of internet penetration into the country (Diakos et al., 2013).
