In an exclusive interaction with Adlin Pertishya Jebaraj, correspondent of Finance Outlook India Magazine, Naresh Rao, Vice President - Financial Services Solutions, India Giesecke+Devrient, highlights that India’s digital payments sector is changing rapidly and innovatively using technology, while being secure, and collaborating not just with banks but also with fintechs. Rao sees a result of card issuance that is real-time, smart, across both physical and screen interfaces, and a key building block in onboarding a new customer experience. 

Naresh is a seasoned professional with 25 years of extensive experience in the Payment and Financial Services Industry. His remarkable journey has encompassed working closely with key stakeholders to drive growth and profitability in established markets, while also venturing into the development of nascent businesses in emerging markets. 

How do you see the current digital payment trends evolving over the last 3-5 years, particularly in issuance products such as credit, debit, and prepaid cards? 

The recent industry reports show that digital payments are growing unprecedentedly in India, especially due to the swift uptake of UPI-based transactions. This has changed consumer behavior greatly as it has dictated the mode of payment preferred by people and the medium through which they would like to pay. The small-ticket payment has continued to be transferred to mobile payment systems using UPI applications like Google Pay, PhonePe and others. 

The increased ease and availability of digital payment channels have transformed the consumer's behavior towards financial products fundamentally, and the use of payment cards is undergoing a changing pattern. The use of mobile wallets and instant payment applications not only contributed to hastening the transition into the digital transaction but also increased the pressure on quicker and more convenient and safer payment experiences. 

The new age of payment has been characterized by customer-centricity. The financial institutions are also emphasizing the development of frictionless, secure and personalized issuance experiences which easily transform physical to digital. Though the use of physical cards is still high, digital-first issuance and mobile-based credentials like virtual cards and tokenized payment solutions are quickly becoming the standard practices in the industry. 

For instance, Giesecke+Devrient (G+D) is an experienced paytech and digital security provider with decades of experience, which remains at the vanguard of this change by facilitating instant and virtual card issuance to banks. Instant issuance provides customers with the ability to issue and activate their cards in branches instantly, whereas virtual cards can provide access to online payments immediately before the physical card is shipped to customers.  

Moreover, the Magic Paper solution introduced by G+D and based on NFC technology helps to fill the gap between the physical and digital banking as it is easier to activate the card. This innovation is a solution to a significant operational usage for issuing banks, which is to make sure that cards are activated in the 30-day limit of the Reserve Bank of India, hence, enhancing efficiency and minimizing costs. 

What are the most significant challenges faced by financial institutions around card issuance and digital payment ecosystems?  

With the payment landscape increasingly digital and interconnected, financial institutions, fintechs, and banks are operating within a dynamic ecosystem with rapidly changing consumer expectations and stricter regulatory frameworks and new technology. The greatest challenges pertain to maintaining a strong security, compliance and operational risk management in a rapidly evolving online space. 

Trust is based on security when it comes to financial transactions. Risk management systems should be constantly reinforced in institutions to prevent and counter possible threats.  

Adherence to the local and global regulatory standards is also highly important, since it protects the interests of consumers and instills a sense of institutional credibility. Fraud detection and risk management using artificial intelligence has become one of the potent tools and facilitates real-time monitoring, anomaly detection, and predictive analytics in detecting possible fraud patterns before they can develop. 

The tokenization technologies have also gained the necessary place in obtaining the security of mobile transactions in wallets, apps, and smart devices. A combination of these actions demonstrates the overall work of the industry aimed at maintaining the balance between innovation and accountability and ensuring that the more sophisticated the ecosystem becomes, the stronger and more reliable it is. 

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How are next-gen authentication (biometric, device fingerprinting, behavioral analytics) impacting the card issuance landscape?  

As the market evolves, the payment industry embraces stronger means of security and provides them with an individual user experience. The developments are transforming how payment cards are issued, verified and used, both in the physical and digital space. Since the implementation of biometric authentication at a card level, all the way to the implementation of AI in real-time fraud detection, the changes are transforming the way consumers engage with financial products. 

An example is dynamic CVV technology, which generates security codes that change periodically and this has greatly minimized online or card-not-present frauds. Likewise, the biometric verification or fingerprint verification which is built within the cards directly into the payment card, will allow every transaction, no matter how small the value of the transaction is, to be verified by the authorized user. Data-driven insights can also be highly valued during artificial intelligence and anomaly detection, as well as predicting fraudulent behavior and enhancing risk controls. 

Additional innovation is provided by G+D Convego Card Designer, which is an AI-based tool that allows the consumer to design his or her payment card in a secure way and within the banking regulations. Through narrow-focused generative and analytic artificial intelligence systems, this platform examines user queries and guarantees that the generated designs comply with the organization's and regulatory provisions.  

With these capabilities built into the banking applications as a standard, the financial institutions will be able to provide a greater level of personalization without undermining operational integrity. This strategy highlights that G+D will continue to invest in research and development to enable the BFSI partners to embrace compliant yet advanced and scalable technologies. 

How do banks evaluate partnerships with fintechs and payment networks from a risk and financial perspective? 

In the current globalized financial landscape, individual organizations cannot afford to provide cohesive customer experiences in a vacuum. The collaboration among issuers, regulators, fintech innovators, and technology providers is the key to achieving this success in building a comprehensive, efficient, and secure financial ecosystem. The digital platform standardization and collaborative innovation are transforming the way financial services are offered. 

According to the Reserve Bank of India report of 2024, it estimates that about 80-85 percent of banks are currently involved in cooperation with fintech partners to provide them with additional digital services. Such partnerships have enabled financial institutions to reduce the cost of operation, increase access to credit, and access previously underserved groups, such as MSMEs. 

Innovation is also encouraged through such collaborations, allowing banks to implement solutions of the next generation on scale and comply with the requirements of standardized tools, including PCI DSS and RBI security recommendations worldwide. 

Collaboration within the ecosystem ensures sustainability, other than just operational efficiency. Through collaboration, banks, fintechs, and technology providers can define industry-wide standards of responsible innovation so that the development of digital finance is not exclusive, non-transparent, and environmentally friendly. 

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Looking ahead, how do you see the future of card issuance and digital payment products in the next 5 years? 

With the convergence of both digital and physical experiences continuing to gain momentum, the coming five years are set to see a significant shift in the design, issue, and consumer experience of payment cards and digital payment products. The importance will be on experiences of smart and personalized payment experiences that can satisfy the customers wherever they have to be, online, in-app, or in-store. 

The future of the payments industry will be characterized by innovations such as interactive issuance of cards and real-time onboarding of new customers digitally. There are also solutions such as Convego Message Smart Interact that allows users to access digital content on a smartphone by scanning printed materials, including letters or brochures, or even metal cards. This technology connects the physical and digital space, further streamlining onboarding, engagement and retention of customers to banks and issuers. 

Another frontier is the emergence of IoT-enabled payments, in which payment credentials are built into connected devices and wearables and constitute new consumer touchpoints and broaden the range of digital financial interaction. G+D is still investing in R&D, which means that financial institutions can utilize these technologies safely and on scale to be ready when payments are no longer transactions but intelligent experiences.