Fintech (FAC-409)

Recommendation Memo

Benefits of Application of Internet of Things (IoT) Technology for Rupay in the Long- run

Addressed to: Dilip Asbe (MD and CEO, National Payments Corporation of India (NPCI))

GROUP 3

Shaurya Vaid - 2010110583

Nikhil Gupta - 2010110431

Shubh Jain - 2010111212

Samyak Agarwal - 2010111177

Viraj Jariwala - 2010110719

Nandika Aiyar -2010110416

An Introduction to RuPay
Repay is a pioneering global payment network in India that is widely accepted at ATMs, US
gadgets, and e-commerce websites nationwide. It is a very secure network that offers anti-
phishing security. The word "rupee" was used in the name, and the "payment" part underscores
that this is an Indian endeavour for card payments. It is our retort to the nationalistic pride that
foreign payment networks experience.

Rupay realises RBI's goal of launching a cashless society. Only by pushing all Indian banks and
financial institutions to become tax-savvy and active in providing electronic payment could this
be accomplished.

The country's leading organisation in charge of retail payments, NPCI, produces Rupay. The
Reserve Bank of India and the Indian Banks Association were given the authority to establish a
safe electronic price and settlement system in India under the Payment and Settlement System
Act 2007 provision.

Because of its efforts and goals, NPCI is considered a not-for-profit organisation under Section
25 of the Companies Act of 1956 and, more recently, Section 8 of the Companies Act of 2013.
This project aimed to provide the banking infrastructure needed to move India towards a cashless
society. NPCI knows the retail payment system needs technological improvements to improve
operational effectiveness for a sizable Indian audience. A RuPay debit card is a plastic card used
as a payment method that the bank issues to its customers with bank accounts. It is commonly
recognised on POS devices, automated teller machines, and online shopping websites. India can
use RuPay to use a local card facility to reach the global payments market. More than 1,100
institutions, including Public Sector institutions, Private Sector Banks, and Regional Rural and
Co-Operative Banks, currently issue RuPay cards.

State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India,
Bank of India, ICICI Bank, HDFC Bank, Citibank N. A., and HSBC are its ten primary promoter
banks.

NPCI currently has 56 banks as shareholders. RuPay has had a significant impact on the nation's
retail payment systems. RuPay is now a well-known brand after being dedicated to the country
by our honourable president, Shri Pranab Mukherjee, receiving support from our honourable
prime minister, Shri Narendra Modi, and afterwards chosen as the card of choice for the
ambitious Pradhan Mantri Jan Dhan Yojana.

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An Introduction to the IoT Technology

Technology is advancing each day and internet penetration is also rising. This rise in new
technology coupled with a rise in internet penetration gave birth to something known as the
Internet of Things (IoT). One crucial question that needs to be answered is “What is IoT?”

In simple terms, IoT is a technology that allows millions of devices across the globe to transmit
data to each other using the internet. IoT not only involves the transmission of data but also
includes data analysis. All of this together makes the process of data transmission and analysis
much more efficient. This IoT technology has various applications across different fields that
include business, agriculture, healthcare etc.

 Businesses can use IoT to track the data related to their assets (machinery) which may
include data related to their location, orders processed by them etc.
 Healthcare professionals can use IoT to track real-time medical data related to their
patients
 In the agriculture industry, IoT can be used to reduce overall wastage and significantly
improve the yield of crops by monitoring and analysing the available data
Another critical question that needs to be addressed is, “How does IoT work?”. The entire
working of IoT technology can be explained through five broad steps which are as follows:

STEP 1: The IoT-enabled devices have some installed software and sensors that enable data
collection.

STEP 2: These IoT-enabled devices are interconnected through the internet.

STEP 3: The data that is collected by the sensors installed in the IoT enabled devices is sent to a
cloud-based platform.

STEP 4: The data is then analyzed using data analytics tools. The processing of data and the
derivation of meaningful insights take place in this step.

STEP 5: The user is presented with the processed data. The data is presented in a user-friendly
manner such that it can be easily understood by the end users. The end users can use the insights
to conduct various studies, automate different processes, or train different models which are
based on machine learning.

This five-step process has a revolutionary various industry. The following report discusses the
impact that this technology can have in the payment processing industry.

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Scope of IoT in the Fintech Domain

The Internet of Things (IoT) is a rapidly evolving technology that has the potential to transform
the way we interact with financial services. The scope of IoT in the fintech industry is vast, and
its impact is being felt across many areas, including payments, fraud prevention, asset
management, customer experience, and risk management. In this article, we will discuss the
scope of IoT in the fintech industry, its potential benefits and challenges, and how it is expected
to shape the future of financial services.

1. Payments

One of the most significant areas where IoT is impacting the fintech industry is in payments.
IoT-enabled devices such as wearables, smart home devices, and mobile phones can be used to
initiate payments, making the payment process more convenient and seamless. For example,
customers can use their smartwatches to make contactless payments, eliminating the need to
carry physical cards or cash.

IoT-enabled payment systems can also help businesses reduce the risk of fraud by using
biometric data and other authentication methods to verify users' identities. This can help reduce
the risk of unauthorized transactions and increase the overall security of the payment system.

2. Asset Management

IoT can also be used to manage assets such as inventory and equipment more effectively. IoT-
enabled sensors can be used to track the location and status of assets in real-time, providing
businesses with more accurate and timely information. This can help improve supply chain
management, reduce operational costs, and increase the overall efficiency of the asset
management process.

For example, a logistics company can use IoT sensors to track the location and temperature of
perishable goods during transportation, ensuring that the goods are delivered in optimal
condition. Similarly, a manufacturing company can use IoT sensors to monitor the condition of
equipment, identifying potential issues before they cause downtime or other problems.

3. Customer Experience

IoT can also be used to provide a more personalized and targeted customer experience. By using
data from IoT devices, such as wearables and smart home devices, financial service providers
can offer customized financial advice and investment recommendations to their customers.

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For example, a bank can use data from a customer's fitness tracker to offer personalized financial
advice, based on the customer's exercise habits and overall health. Similarly, a financial advisor
can use data from a customer's smart home devices to offer customized investment
recommendations based on the customer's lifestyle and preferences.

4. Risk Management

IoT can also be used to monitor and mitigate risks associated with financial transactions. For
example, IoT sensors can be used to monitor environmental factors such as temperature,
humidity, and light, ensuring the safe transport of goods and products. IoT-enabled devices can
also be used to detect fraudulent transactions by tracking user behavior and identifying patterns
that may indicate fraud.

5. Challenges and Potential Risks

While the potential benefits of IoT in the fintech industry are significant, there are also several
challenges and potential risks that must be addressed. One of the primary concerns is the security
of IoT-enabled devices and systems. IoT devices are often vulnerable to cyber-attacks, and the
sheer number of devices involved in IoT networks makes it difficult to ensure that each device is
secure.

Another challenge is the interoperability of different IoT devices and systems. As IoT networks
become more complex, it can be challenging to ensure that different devices and systems can
communicate with each other effectively. This can lead to data silos and make it difficult to
achieve a unified view of the data.

Finally, there is a concern about the privacy of user data. IoT-enabled devices often collect a vast
amount of data about users' habits and behaviors, and there is a risk that this data could be
misused or compromised. Financial service providers must take steps to ensure that user data is
collected and used ethically and that users have control over how their data is collected and used.

Market Analysis of IoT Payments Industry

Historically, most of the payments across the globe were made using physical currency. The
growing advancement in technology, coupled with the need to increase the efficiency of
payments, forced the people to change the way they make payments. People started making
payments efficiently in a contactless manner which lead to a steady growth in payments using
IoT industry.

According to a recent report by Introspective Market Research Group, the market size of the
global IoT payment industry was 155 billion USD in 2021 and is expected to reach 5.4 trillion
USD by 2028 (Research, 2021). The industry is expected to grow exponentially in the next seven

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years at an expected CAGR of approx. 66%. All these statistics are driven by some key growth
drivers that fuel the growth of this industry. Some of the key growth drivers are as follows:

 Increase in internet penetration.

 Advancement in IoT technology
 Adoption of mobile phones to make payments
 Demand for the efficient transaction process
As discussed in the previous section, the IoT payments market is huge and is expected to grow
exponentially. On the other hand, this market is extremely fragmented with several players
operating in the market. The players in this market include payment solution providers, device
manufacturers, system integrators etc. Gemalto NV, Ingenico Group, VeriFone Systems Inc., and
PAX Global Technology Ltd. are a few of the leading companies in the market.

Even though there are many players in the market, most of them are device manufacturers,
system integrators etc. This market still has a lot of potential for leading payment companies like
Rupay. Entering this high-growth market would allow payment companies to attract new
customers and accelerate their growth in the long run.

Competitive Landsacpe: Paytech Companies Using IoT

Many paytech companies are using IoT technology to attract new customers. Some of the
companies are as follows:

1. Paytm: Paytm is one of the largest digital payment platforms in India and uses IoT-enabled
payment devices to offer contactless payment options to its customers. Paytm's IoT-enabled
payment devices allow customers to make payments using QR codes, NFC, and Bluetooth,
making payment transactions faster and more convenient.

2. Mswipe: Mswipe is a payment technology company that uses IoT-enabled payment devices to
offer payment solutions to businesses of all sizes. Mswipe's IoT-enabled payment devices allow
businesses to accept payments using various modes, including contactless payments through
NFC-enabled devices. This can help reduce transaction times and enhance the customer
experience.

3. Pine Labs: Pine Labs is a payment technology company that uses IoT-enabled payment
devices to offer payment solutions to merchants across various sectors. Pine Labs' IoT-enabled
payment devices allow merchants to accept payments using various modes, including contactless
payments through NFC-enabled devices. This can help improve the payment experience for
customers, reducing transaction times and eliminating the need for physical contact during
payments.

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4. Ezetap: Ezetap is a payment technology company that uses IoT-enabled payment devices to
offer payment solutions to businesses of all sizes. Ezetap's IoT-enabled payment devices allow
businesses to accept payments using various modes, including contactless payments through
NFC-enabled devices. This can help reduce transaction times and improve the customer
experience.

Scope of IoT for RuPay

Rupay cards are a type of debit card issued by the National Payments Corporation of India
(NPCI). As with any other card payment system, the scope of IoT for Rupay cardholders would
primarily focus on improving the convenience, security, and efficiency of card transactions. Here
are some potential areas where IoT could be used to improve the experience of Rupay
cardholders:

 Contactless Payments: Rupay cardholders could use IoT-enabled devices such as

smartphones, smartwatches, or fitness trackers for contactless payments. This would
allow for faster and more convenient transactions, especially in environments where
carrying a physical card can be cumbersome.
 Smart ATMs: IoT technology could be used to create 'smart' ATMs that offer more
personalized and efficient services to Rupay cardholders. For example, smart ATMs
could use IoT sensors to detect the arrival of a cardholder and automatically initiate the
transaction process, eliminating the need to insert a card or enter a PIN.
 Fraud Detection: IoT devices like cameras and sensors could be used to detect fraudulent
activities around Rupay card transactions. For example, cameras could be used to monitor
ATMs to detect any skimming or card capture attempts, while sensors could detect any
suspicious activity or patterns in card use that could indicate fraud.
 Personalized offers: IoT technology could be used to offer personalized promotions and
offers to Rupay cardholders based on their transaction history or location data. For
example, a cardholder who makes frequent purchases at a particular store could receive a
special discount or offer from that retailer through their IoT-enabled device.
 Real-time Alerts: IoT technology could be used to send real-time alerts to Rupay
cardholders about their account balance, transaction history or other important
information related to card usage. This could help cardholders stay on top of their
finances and avoid overdrafts or other problems.

Benefits of IoT to Rupay Customers

The implementation of the Internet of Things (IoT) in the Rupay app can bring numerous
benefits such as enhanced security, improved payment experience, and personalized services.
Here are some ways IoT can be implemented in the Rupay app:

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 1. Enhanced paymet security: The application of IoT opens gateway in improving payment
security by enabling authentication that is secure, and to autohorize the transactions. It
could be implemented in such a way that they can generate one time passwords (OTP’s)
or do biometric authentication for transactions , hence, making them more secure than
traditional methods.
2. Personalised offers and rewards: RuPay can give personalised rewards and offers to
customers depending on their preferences and behaviour by taking advantage of IoT data.
Customers who frequently use RuPay cards for dining out, for instance, may be offered
discounts and other kinds of incentives at restaurants.
3. Improved customer service: IoT can assist RuPay in improving customer service by
giving real-time data on transactions, which facilitates faster and more accurate dispute
settlement. Chatbots powered by IoT can also be utilised to provide clients with
immediate support and help.
4. User experience: IoT can be used to improve the user experience by facilitating smooth
and seamless transactions. Customers would no longer need to carry their cards or
phones, for instance, if RuPay enabled payments using smartwatches.
5. Merchant insights: IoT data can offer insightful information to businesses who take
RuPay. For instance, they can tailor their services and raise client happiness by using data
on consumer behaviour and preferences.

Overall, the benefits of IoT to customers of RuPay are numerous, ranging from enhanced
payment security to personalized rewards and improved user experience. By leveraging IoT,
RuPay can deliver a superior payment experience to its customers and stay ahead of the
competition.

Threats Related to Integration of IoT for RuPay

According to IHS Markit research, there will be 125 billion IoT devices in operation by 2030, or
around 15 gadgets for every person in the world. These modern tools and technology may offer
fresh advantages for the company. If they are not properly controlled, they might also create new
fraud and cyber-security issues. Tens of millions of customer details have been compromised in
recent years as a result of cyberattacks on linked power systems. While still releasing connected
devices onto the market, manufacturers of consumer goods like baby monitors underinvested in
security. More protections to manage client information are required as a result of the growth of
IoT devices. A few of the main issues are and which can be mitigated by a few rules and
regulations are:

● Privacy Issues- since IoT has so much data. It monitors people's actions, routines, and
movements. The data generated can easily be misused. Data theft is another frequent IoT
security risk. This is frequently done to obtain access to financial or personal data.

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 ● Security Issue - there’s a higher risk of cyberattacks causing more security breaches like
gaining access to personal data, stealing cash or information, or assaulting vital
infrastructure systems.
● Regulatory issue - The implementation of IoT payments may be hampered by unclear regulatory
frameworks, which might also give rise to legal issues.
● Device Management - No unified standard exists for IoT devices since the IoT ecosystem
is still developing. Hence, the functionality and usefulness of devices made by various
manufacturers may not be compatible with one another.
● Compatibility, Reliability & Technical Complexity: These are three problems that will be
faced by RuPay while integrating IoT. These could be considered as greater problems to
the customers, as it will take time for common people to get familiarized and to start
trusting this type of payment against the legacy methods.

Mitigating the Risks:

Make users aware of the security breaches - Uncertain standards make it challenging to impose
security controls on new devices, and users who are inexperienced with scams and security
dangers may unintentionally spread viruses and other online hazards. If they are made aware by a
company like RuPay, then maybe, to an extent, it can be brought down. To avoid imitation,
unauthorized transactions, and account takeover, an efficient transaction architecture must
provide payer and device authentication. Payment network security must be planned to thwart
malicious attempts and guard against compromising user data on IoT devices. For IoT payments
to become more widely used and democratic, customer confidence must be maintained. This
confidence must be protected from fraud and cyberattacks. IoT service providers and other
organizations are now required to pay closer attention to how information is handled, thanks to
new regulations that have reinforced rules for personal data management in nations all over the
world. To defend IoT systems and devices from cyberattacks, robust security mechanisms may
be deployed. These include encryption, authentication, and access limits. Implementing
firewalls, intrusion detection systems, and routine software upgrades fall under this category. By
enabling the deployment of security and access control systems that depend on facial
recognition, voice printing, and geo-location tracking capabilities, IoT devices have the potential
to improve security as well. Another method of mitigating the threats is to link IoT devices to
business networks or governmental systems via secure wireless networks. In addition to
defending against assaults, this prevents the transmission of sensitive data across unprotected
networks.

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Action Plan for Implementation of IoT Technology for RuPay
Implementing IoT in Rupay cards would require careful planning and execution to ensure that the
technology is deployed effectively and securely. Here are some key steps that could be included in an
action plan to implement IoT in Rupay cards:

 Conducting a Feasibility Study: The first step would be to conduct a feasibility study to
determine the technical and financial feasibility of implementing IoT in Rupay cards. This study
would also need to identify the potential benefits and risks of the technology, as well as any
regulatory or legal aspects that would need to be considered.

 Develop a business case: After completing the feasibility study, a business case should be
developed outlining the potential costs and benefits of implementing IoT in Rupay cards. This
case should also identify the key stakeholders and decision makers who will be involved in the
implementation process.

 Identify use cases: The next step would be to identify specific use cases where IoT could be
deployed to improve the Rupay cardholder experience. These use cases should align with the
overall strategic goals of the organization as well as the needs and preferences of Rupay
cardholders.

 Develop a deployment plan: Based on the identified use cases, a deployment plan should be
developed that outlines the specific steps and timelines for implementing IoT in Rupay cards.
This plan should also identify any resources or expertise that will be needed to complete the
implementation process.

 Test and evaluate the technology: Before deploying IoT to Rupay cards, it is important to
thoroughly test and evaluate the technology to ensure that it works as expected and is secure.
This testing should include both functional testing to ensure the technology is working properly
and security testing to identify and address potential vulnerabilities.

 Technology Launch and Monitoring: Once the technology has been successfully deployed, it is
important to monitor its performance and effectiveness to ensure that it continues to meet the
needs of Rupay cardholders. This monitoring should include regular data analysis to identify
trends and patterns in card usage, as well as ongoing maintenance and updates to ensure the
continued security and functionality of the technology.

Implementing IoT in Rupay cards would require various resources, including:

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  Personnel: The project team would need skilled personnel with expertise in IoT technology,
software development, security, testing, and project management. The team should include
individuals from different departments such as IT, operations, marketing, and legal. A rough
estimate for the cost of personnel can range from $50,000 to $150,000 per team member per
year.

 Hardware: The hardware required for IoT in Rupay cards would include sensors, RFID chips,
communication modules, and other devices that would enable communication between the
card and other devices. A rough estimate for the cost of hardware can range from $10 to $50
per card.

 Software: The software required for IoT in Rupay cards would include applications for processing
and transmitting data between the card and other devices, as well as for managing the security
of the card. A rough estimate for the cost of software development can range from $50,000 to
$250,000.

 Testing tools: Testing tools and software would be required to validate the IoT technology and
ensure its proper functioning. A rough estimate for the cost of testing tools can range from
$10,000 to $50,000.

 Infrastructure: A secure infrastructure would be required to support the communication

between the card and other devices. This may include cloud-based servers, network equipment,
and other infrastructure components. A rough estimate for the cost of infrastructure can range
from $50,000 to $500,000.

Cost analysis for the resources:

1. Personnel:
 Project Manager (1 year): $150,000
 IoT Developer (2 years): $200,000
 Security Analyst (1 year): $100,000
 Testing Engineer (1 year): $100,000
 Marketing Specialist (1 year): $80,000
 Legal Counsel (1 year): $120,000
 Total Personnel Cost: $750,000
2. Hardware:
 IoT Sensors and RFID Chips (1 million): $10 million
 Communication Modules (1 million): $1 million
 Total Hardware Cost: $11 million
3. Software:
 IoT Application Development: $250,000
 Security Software Development: $150,000
 Total Software Cost: $400,000
4. Testing Tools:
 IoT Testing Tools: $50,000

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  Security Testing Tools: $25,000
 Total Testing Tools Cost: $75,000
5. Infrastructure:
 Cloud-Based Servers: $200,000
 Network Equipment: $100,000
 Total Infrastructure Cost: $300,000
6. Miscellaneous Expenses:
 Travel and Accommodation: $50,000
 Contingency Fund: $500,000
 Total Miscellaneous Expenses: $550,000

Total Project Cost = Personnel Cost + Hardware Cost + Software Cost + Testing Tools Cost + Infrastructure Cost +
Miscellaneous Expenses

= $13,075,000

Note:- These figures are based on rough estimates.

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