Fiscal 2022 has set the foundation to win and it feels almost like'lull before the storm'. What is driving us is the patience and the commitment to do allwe can for our stakeholders the belief in ourselves that continues to be reinforced byour existing and potential customers the validation of our strategy to focus on thepayments modernization opportunity and the conviction in what we are here for which isto transform humanity with the power of payments. Our corporate journey for 30+ years isenriched while working with global leaders and start-ups alike.
Keep going the best is yet to come!
What keeps us going
At RS Software innovation creativity and entrepreneurship cometogether in delivering payment systems that impact people country businesses andgovernment making it possible for us to address the demand for new type of financialinfrastructure globally which enables shared digital capabilities. The four major paymentplatforms that we have helped to build globally process 350+ billion transactionsannually. India's success story with digital payments is unfolding every minute to achievethe next level of success and what enables this unprecedented set of achievements are thethree major payment platforms exclusively built by RS Software. The RS Payments InnovationLab pursues with passion that 5G enabled connectivity coupled with advances in AIalgorithms quantum computing and blockchain will radically alter the payments leadingto continuous demand for payments modernization - a multi-decade opportunity. Thecompany's leadership is committed to execute a fine balance that helps to achieve optimalcashflow based financial strategy while reaching out in the market with its strategicpartnering model to go after the continuing growth opportunities in paymentsmodernization.
Transforming India - dream coming true
During the fiscal 22 transactions volume on the UPI platform scaledfrom ~0.09 billion since launch in 2016 to a staggering 5+ billion transactions and mostrecently the month of June recorded 5.8 billion transactions valued at Rs 10 trillion.There are today 330 banks live on the UPI platform. What started as a small step when RSSoftware exclusively built the UPI platform has become a 'giant leap' for India. With thelaunch of UPI123Pay in March 2022 making UPI transactions possible for feature phoneusers and available in the offline mode as well rural India particularly has gotempowered bringing with it true financial inclusion. This level of adoption beartestimony to UPI architecture and design strengths executed by RS Software. Mostimportantly it demonstrates scale and innovation at a pace not achieved anywhere else inthe world.
Major payment networks Visa and Mastercard are committed to theprinciple of payments anytime anywhere and recognize that UPI like systems will shapethe digital financial services landscape globally. UPI is the first faster payment systemthat truly has demonstrated the success of going international UPI is on a roll to beaccepted in many countries. The technology stack of UPI built exclusively by RS Softwareis such that it enables easy integration with other payment infrastructure. Indiangovernment has been fostering relationships with several nations including UAE and Francein the recent past. Prime Minister of India Mr Modi said at the recent Digital India weekthat "Everyone including the World bank has appreciated it as the bestplatform".
Making this world a better place to be
The bedrock of India's digital payment infrastructure the three majorplatforms have built a solid foundation for India making it amongst the first fewcountries globally to announce the launch of central bank digital currency (CBDC). Howmoney moves has undergone and is undergoing huge unprecedented change - increasinglycards digital and mobile payments dominate and cash is fast on the way out. Advances intechnology the COVID-19 pandemic crypto currency and more have shaped the movement ofmoney and have redefined roles for banks and cash systems. The COVID-19 pandemic hasaccelerated the move away from cash. Lots of youngsters don't carry cash anymore. Therewill come a moment and it's approaching fast when merchants and shopkeepers will say"Why keep accepting cash we're going to stop accepting cash."
India is leading the world in terms of digital payments innovations.Its payment systems are available 24X7 available to both retail and wholesale customersthey are largely real-time the cost of transaction is perhaps the lowest in the worldusers have an impressive menu of options for doing transactions and digital payments havegrown at an impressive rate. While presenting Budget 2022 the Indian Finance MinisterNirmala Sitharaman stated Digital Rupee the name of the Central Bank Digital Currency inIndia will give a big boost to the digital economy. Digital currency will also lead to amore efficient and cheaper currency management system she said. In order to counter thecryptocurrency craze the central banks across the globe are taking a keener look atintroducing central bank digital currencies. Central Bank Digital Currencies is thedigital form of a country's fiat currency. This will be issued by the federal bank of thatparticular country. Although it is in digital form CBCD can be exchanged with the fiatcurrency of the country.
[As per a PhonePe-Boston Consulting Group report ("Digitalpayments in India: A $10 trillion opportunity") India's digital payments market isexpected to increase more than threefold from the current $3 trillion to $10 trillion by2026. This would translate to digital payments constituting 2 out of 3 paymenttransactions by 2026.]
All that can be digital comes together - Metaverse
The massive decrease in the cost of computing power and the widespreadavailability of devices able to process information has led to an unprecedented level ofconnectivity. For the first time algorithms can be created to read and analyze bankaccount information and combine this data with other information from disparate sources.Moreover realtime payments allow for the movement of money in a matter of secondsregardless of the time or date of application. Consumer and business expectations haveevolved and when end user demands change existing players must innovate in order to meetthese demands. The maintenance and reporting of real-time balances is essential to allowcustomers to benefit from realtime payments and open banking. The technology to meet theseneeds is available today. By using a flexible payments hub combined with a modernorchestration layer messaging standards and API-based interfaces banks will improvetheir positions for the future. Customers want banks to provide these services and bankswill add value and increase their share of the value chain if they can meet them.
The new payments ecosystem views open banking and real-time payments astwo sides of the same coin: they are part of a larger transformation of how banking isconducted today. While banks have a checklist of to-dos the list of opportunities is evenlonger.
With digital payments must come digital authentication and security ofcourse. Biometric measures are tipped to bridge the gap here. According to Juniperresearch roughly 90 percent of smartphones worldwide will have a form of biometriccapability by 2024 to enable authenticated mobile payments. Juniper's research alsoforecasts $2.5 trillion in mobile payments facilitated by biometric data by 2024compared with $228 million in 2019.
We are closer to a fully digital payment landscape than we've ever beenbefore online payments have been scaling steadily over the past 5 - 10 years and thenatural evolution of online payments to augmented payments is already happening before ourvery eyes. Everyday things such as ingame or in-app purchases from places like Fortnite'sVBuck System the NFT market in places like Opensea communities and tokens are replacingtraditional systems we all relied upon where the direct consumer can pay the producer ofthe digital asset directly with no financial intermediary in their decentralised way. Theinstant element of blockchain and crypto payments means instant processing and settlementof digital assets like NFTs cryptocurrency and other future discovered digital assets.These assets could be traded sold and marketed through the metaverse marketplace tied toan individual's blockchain based payment wallet or equivalent meaning a secure instantscalable way of accepting a payment for commerce. I encourage you to read in this annualreport about Metaverse the emerging future for humanity and also about CBDC likely tobecome the way the world pays as it goes through its everyday life.
The digitization of B2B payments
While the use of paper checks continues to decrease by the year itstill accounts for more than 50% of the overall transaction value for B2B payments. Whenit comes to vendor relationships businesses are still preparing and sending paperinvoices or emailed invoices that get printed out and annotated by someone in an officewho inputs it into an ERP system. The payment experience is even more manual. For examplesomeone writes paper checks puts them in envelopes or inputs payments into a spreadsheetfor uploading to the bank for ACH or EFT. Or it's someone with a corporate purchasing cardcalling the provider and giving the payment details over the phone.
With the recent move to a more remote workforce businesses see thattheir employees need to manage their accounts receivable and payable functionality outsideof a physical office. Digitizing B2B payments including accounts payable accountsreceivable expense reimbursement and employee-initiated spending is the solution withsignificant benefits.
With digital B2B payments a business has more visibility into whatfunds are going where and why. In turn they gain the transparency and control needed tooptimize cash flow reduce errors and mitigate payment-related fraud. Another benefit inreducing your manual payment processes gets down to the bottom line: saving money.Reducing checks by 1050% equates to $1.3-$58.3 billion savings each year. The hard costsof B2B check payments disappear when migrating to digital processes including paperpostage and the time it takes to stuff envelopes. For all of these reasons global B2Bnon-cash transactions will increase to nearly 200 billion transactions by 2025 from 121.5billion in 2020 according to Capgemini estimates.