Following the pandemic-led behavioral shift in consumers paired with the digitalization of Kirana stores, new payment frameworks have gained a stronghold in the country in response to the rising demand for digital payment solutions.
In recent years, techceleration (tech-led acceleration) has changed the financial landscape. The use of paper-based modes of payment, such as cheques and demand drafts has plunged significantly in terms of volume and value, while the popularity of digital payments has surged on both measures.
Then came along the pandemic, expediting this transition into the consumer realm. This global crisis alone has significantly altered the way consumers manage their finances. With the people going back to normalcy, leading to increased consumer demand, it is evident that this new financial landscape is here to stay. As the economies return on track, going digital is not only an easy solution for the consumers and retailers, but it is a vital part of the road to economic recovery.
In the past year, the retail digital payments market has catapulted to new highs as more people retreated from using cash in fear of contracting Covid-19 and gravitated towards the digital mode of transactions for convenience. Reserve Bank of India data showed that the digital transactions in the total volume of non-cash retail payments during 2020-21 period jumped to 98.5 per cent, with credit transfers being the most used method. The data in the previous year stood at 97.0 per cent.
While the majority of the people opted for credit card payments, others preferred modes like National Electronic Funds Transfer (NEFT), Unified Payments Interface (UPI), Immediate Payment Service (IMPS), BHIM Aadhaar Pay, and others, RBI data stated. Other than the government-backed transaction modes, private companies also flourished during this period. Existing companies like Paytm, Payworld, Google Pay, PhonePe and others have gained much traction during the pandemic period. Industry experts foresee these firms further strengthen their position in the market with their ease of accessibility in the coming future. According to a research report—'India Payments Market Report 2021-2027: Digitization in Payments has Gained Significant Momentum’ and the Indian payment market is expected to reach Rs 280.84 trillion by 2027.
Under normal conditions, it would take a long time to achieve the targeted numbers. But with the ongoing circumstances and availability of assisted retailer stores as-a-medium in remote areas, there is a possibility that the Indian market may hit the bullseye on the back of ongoing trends in the digital payment landscape. Some of the retail trends are as follows:
- Online Shopping: The pandemic-led lockdowns emerged as a blessing in disguise for India's e-commerce sector as it grew 36 per cent over the year in the last quarter of 2020, with the personal care, beauty and wellness segments being the most significant beneficiaries. Propelled by the increasing penetration of smartphones, backed by the 4G connection and ease of buying, the sector is expected to grow to US $ 200 billion by 2026 from US $ 38.5 billion in 2017.
- Tap-and-Go Payments: This type of payment system is on a boom because it allows people to avoid contact with other machines besides their credit or debit cards. Even in the post-covid era, with people living in an unknown fear of contraction, PayWorld expects contactless payments will continue to rise. In addition to this, the RBI has increased the limits for contactless payments from Rs 2,000 to Rs 5,000, a move aimed to promote digital transactions further.
- Digital Wallets: Backed by the digitalization of Kirana stores across the country and the rising demand of contactless payments, digital wallets have made inroads in the offline retail segment. Digital wallets have come up as one of the most favourite modes of contactless payment. Initiatives taken by digital wallet companies to tap into the kirana segment have contributed to this trend.
- QR code payment: Payments made via QR code (matrix created in 1994 for the Japanese automotive industry) are prevalent in an emerging market like India primarily because they are easy to use. This mode of payments can be processed in multiple ways, including app-to-app payments, smartphone scanning the business's QR code, and others.
- Wearable payment devices: With technology developing at a rapid pace, the time has come for wearable smart devices, such as smartwatches, that not only keep track of users' health and overall metabolism, but also allow them to make transactions with the tap-and-go method. Transactions made by such smart devices are considered as safe.
As per the existing technologies, all these trends of making payments are considered safe and hassle-free. People are adopting these trends with open arms. In the foreseeable future, we will witness the full potential of these trends and how they develop. Meanwhile, companies and banks, along with the RBI and the Central government, are making joint efforts to keep the platform secure and free from cyberattacks.
- This article is penned by Praveen Dhabhai, COO, Payworld.