The past few years have witnessed significant developments in the digitization of payments in India. Although cash remains prevalent, demonetization provided a strong impetus for consumers to move to online payments, which was only further accelerated by the pandemic as contactless transactions became a safer option. As turbulent as the past year was for the economy, India retained the top spot for most digital payments made in real-time, with over 25.5 billion transactions.
According to ACI Worldwide’s reports, by the year 2025, the share of real-time payments volume in overall electronic transactions is likely to exceed 70 percent.
Here are Some Trends Shaping India’s Digital Landscape
Technology has undoubtedly been a key driver of evolution in the financial and banking services sector. Digital advancements have radically revolutionized the way financial services are conceptualized, regulated, disseminated, and consumed. The emergence of fintech in the past few years has made these technological innovations more accessible and has helped all kinds of businesses to expand beyond the realm of traditional financial services.
Online Shopping - The country’s e-commerce sector witnessed significant growth last year as the restrictions due to the pandemic drove consumers towards online shopping. These restrictions, accompanied by accessibility to the internet and ease of buying, led to a rapid increase in online transactions. Even though the restrictions have eased over the past few weeks, consumers continue to rely on digital transactions to avoid physical transactions.
Tap-and-Go Payments, the New Trend - With waves of the pandemic, digital, contactless payments increased across the world. Tap-and-go payment methods have become an alternative not only because they are safe and contactless but also because they are quick and convenient. And to further promote cashless transactions, the Reserve Bank of India enhanced the limits for contactless payments from Rs 2,000 to Rs 5,000, a move that is expected to give a boost to digital transactions in the country.
Interoperability for Greater Freedom of Choice - As per the new regulations of the Reserve Bank of India, people who use mobile wallets would soon be able to transfer money across different wallet applications and from wallet to bank accounts. The interoperability of mobile wallets would not only make digital payments easier but would also offer consumers the freedom of choice and more flexibility in digital transactions.
QR Code Payments for Better CX - Payments through QR codes have continued to prove their flexibility, especially in emerging markets like India, primarily because of its simplicity. QR codes ensure that consumers and merchant partners have access to safe and quick contactless payment options. With the onset of the pandemic, it has increasingly been used by even the smallest business owners, whether at local supermarkets or at neighborhood Kirana stores helping it gain wider acceptance by consumers. This method of contactless payment is easier to use, in comparison to others as it only requires an app that allows it to be used at any specific establishment.
Wearable Payment Devices Picking Pace - Wearable devices like smartwatches and bands have come up as another smart and secure way to make contactless payments. With the help of advanced technology integrated into smart wearable devices, consumers can now make tap-and-go payments ensuring secure and error-free transactions.
Cybersecurity, Call to Attention - While digital payments become a norm in the country, the issue of their security is being taken up very seriously. Cybersecurity has become a concern for financial institutions as well as fintech companies as they continuously strive to reduce exposure to frauds and financial crimes while adhering to the rapidly evolving regulations. Frequent communication and awareness initiatives for consumers are the key.
Here is How Fintech Apps and Financial Institutions are Ensuring Consumer Safety:
Multi-Factor Authentication - Most banking and wallet apps have now opted for multi-factor authentication systems - like one-time passwords (OTP), security code checks, etc. for an added layer of security
End-to-End Encryption - Banking and mobile wallet apps have become a hotspot for hackers, and to guard against that, end-to-end encryption, security audits, and regular penetration tests help ensure maximum safety for users
Fingerprint and Face Recognition - Financial and digital payment apps have also started using fingerprint and facial recognition features supported by mobile devices
Real-time Alerts - Digital payment apps also send regular updates to their users whenever they make a transaction online. These real-time notifications help consumers track their activity and immediately report fraud.
The Tech-savvy Generation
The younger generation is the flag bearer for innovation and change. If market trends are to be trusted, the younger, tech-savvy generation prefers to opt for digital transactions instead of card payments. They are more inclined to use mobile wallets, hi-tech apps like the Sodexo-Zeta App, and wearable technology for quicker transactions, whether P2M (person to merchant) or P2P (person to person). As the country continues to move towards more digital transactions, with the goal of a cashless economy, it is crucial for stakeholders to continually work towards building stronger infrastructure that ensures risk-free transactions and help usher innovations that promote the acceptance of digital payments.