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The digital future, now

The steady rise of digital payments has become a flood as consumers and corporates alike experience a new way of managing their financial transactions in the face of the Covid-19 pandemic

It is estimated that digital payments have increased across the world by 50% in the wake of the Covid-19 outbreak. Several countries are taking measures such as limiting the circulation of fiat currency, quarantining and disinfecting bank notes, working on plans to launch digital currencies and working with FinTechs to bring out new modes of transactions that can be done remotely.

China, already a pioneer in the digital payments space, has re-started discussions about a government-issued digital currency, which, it is claimed, could end dependency on cash in less than a year. In China more than 70% of the country’s internet users make online payments.

Countries like India and many African nations where cash is still king are also running campaigns to promote digital payments. India’s umbrella body for all kind of payments, the National Payments Corporation of India (NPCI) has been urging consumers to make UPI (Unified Payments Interface) payments and thereby reduce social contact and the chance of virus transmission.

NPCI is also working on ensuring that the small-time vendors and merchants, who do not have PoS and depend only on cash, also start using digital means of payments by making UPI or UPI-QR available to them.

Over the last four years in India, digital payments have grown from a mere 5% of all payments to over 30% on the back of demonetization, the growth of FinTech players enabling payments, along with a sustained campaign by the government to make India a less-cash economy.

A large part of the digital payments, in both volume, and value come from OTA (online travel aggregators), movie and event booking portals, and entertainment (that includes retail shops, food courts, bars, and restaurants). These categories together form around 40% of the total digital payments’ universe. The rest comes from utility bills and financial services segments.

“It is tough to say whether the digital payments will go up dramatically or will there be some short-term impact. I feel the short-term impact can be in the range of 30-40%. However, we have witnessed a massive jump in digital payment sales coming from the small neighborhood and grocery stores,” said Mandar Agashe, founder of Sarvatra Technologies, India’s leading banking technology provider of UPI technology.

Agashe said that in the last few days of March, the company had witnessed a jump in card-based transactions, both volume and value, in the small grocery stores across the country as people are resorting to panic buying and hoarding essentials to last for at least 2-3 months.

“…but we will have to wait and watch if Covid-19 fear is temporary or will this bring a change in consumer behaviour,” Agashe said, adding that India has never seen such a large scale shut-down. Sarvatra’s data also speaks volumes about the shift that is happening from one segment to others as people are using digital payment instruments (IMPS – Immediate Payment Service, UPI, cards) to consume more entertainment on the OTT (Over-The-Top) medium.

Escrowffrr, a FinTech providing escrow payment solutions, is of the view that currently small ticket size transactions are possible with the proliferation of various secure, convenient digital payment options, but for certain large ticket and contingent-based transactions this can be a challenge.

“It is almost impossible to conclude these urgent critical transactions without some form of physical intervention. We are creating a unique escrow-focused payments ecosystem which offers a complete suite of offerings such as e-signatures, eKYC, e-agreements, digital stamp papers, etc., making customer journeys simple, seamless and completely paperless for such transactions,” said Ashwin Chawwla, founder and CEO, Escrowffrr.

Covid-19 could be an inflection point for the wider adoption of digital payments globally. Many companies are likely to re-think their retail and payments strategy as consumers avoid going to traditionally crowded places like malls, theatres etc for a significant period of time.

Article by –

Priyanka Pani
Senior Regional Correspondent – Middle East and Asia, IBS Intelligence

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