Net Neutrality: What it could mean for mobile payments

It’s impossible to be doing business in India and not be part of the Net Neutrality debate over the last few weeks. The idea that Internet service providers (ISPs) should treat all data that travels over their networks equally, argues that no bit of information should be prioritized over another. However, ISPs that make big infrastructure investments in creating networks want to have more choice on how they partner with services and charge their customer for not only the bandwidth but also the OTT services they are using. More than 1 million Indian consumers recently participated in the recent TRAI survey to let the authorities know that net neutrality is important for them.

However, not many know that the current net-neutrality debate focuses mainly on accessing Internet through a conventional desktop/laptop. Mobile usage is currently not completely in this purview. India is rapidly embracing the mobile revolution — with currently over 970 million mobile subscribers for 1.3 billion people and 213 million accessing internet through the mobile, its imperative for mobile net neutrality to be governed by the same laws.

But has mobile internet ever been net neutral? For one, we pay differential rates for our mobile and broadband services — our broadband services tend to be cheaper per GB compared to mobile. Secondly, mobile services, which are essentially distributed using mobile stations, seem to be more directly related with infrastructure and sharing of stations between service providers, which means at some point, service has been dependent on the carrier you choose and the websites that you visit or specific Over The Top (OTT) service that you use like WhatsApp, Skype et.c. Based on the current net-neutrality debate Mobile Service Providers (MSP) seem to be of the opinion that much higher charges is the only way to encounter the loss that it estimates as a result of a uniform access law. In the USA, where the net neutrality debate has been on for much longer than India, it is only recently that mobile services came under the FCC ruling for net neutrality.

So how could net neutrality impact mobile payments? Currently there are 3 distinct players in this space — Banks, MSP wallets and 3rd party & social payment services. And here’s what absence of net neutrality could bring forth for each:

1. Banks — For bank apps, this could signal that banks aligned to a particular MSP will get easier/faster access for their consumers using the same MSP. They could also potentially tie up with more than one MSP to ensure all their consumers get the same speed of transactions but the cost involved might make mobile payments a paid feature for consumers and not as cost effective for banks.

2. Mobile Wallets powered by MSPs — Without a doubt, the absence of net neutrality in this case can be a boon to wallet and payment services owned by MSPs. One could expect faster payments within networks compared to slower service to other networks. This could mimic the erstwhile Intra-inter banking delays. But clearly, this will not cost the operators additionally and can hence be low priced or free for the consumer, making this a big push for the MSPs

3. 3rd party and social payment services — These are usually clubbed with the OTT services. As these payment services are dependent on banks for backend integration and on MSPs for Internet access, this service may become expensive/charged per use. However, the benefits of interoperability and wider use (domestic/international) can weigh up the odds in their favour. Also as people move to outweigh cost to convenience, these services can provide much higher value than the Banks or MSP wallets.

As a growing population of people move from traditional internet to a mobile first/mobile only way of access, we believe that Net Neutrality will certainly dominate the conversation. Internet’s dominance on our daily lives will only continue to grow and it is imperative that governments and citizens make an informed decision to ensure that it doesn’t become restrictive and expensive.