Authored by Nityanand Sharma
The impact COVID-19 has had on businesses and humanity in general, is unprecedented. While many are striving to find their footing in this crisis, this on-going pandemic has also been instrumental in shaping growth opportunities for the country’s digital payment ecosystem.
Modern fintech players have stepped up to empower customers with seamless, hassle-free and contactless payment mechanisms.
During the nationwide lockdown and even post the easing of the curfew, transaction size on the Unified Payments Interface hit an all-time high, as people were skeptical to use currency notes for health and safety reasons.
This attitude to refrain from close interactions gave online payments a much-needed boost. Today, digital payments are on the rise for everything from essential grocery shopping, food ordering, bill payments, medical payments, utility payments and mobile top-ups.
According to a recent report, the number of digital payment transactions has witnessed a surge of 23 percent between June and July 2020. This growth can be attributed to the rapid adoption of digital payment methods such as e-wallets, UPI, debit/credit cards and net banking, among others.
A survey conducted by the Boston Consulting Group and Facebook, indicated an increase in online payments since late March this year, despite a nationwide lockdown. The report also noted that there is a high possibility for the trend to continue so over the following six months.
The pandemic has hastened the pace of embracing online payments even in small cities. There has been massive demand from the small grocery traders for digital payment solutions as they are quick, easy, and hassle-free.
But, this is where it gets interesting. While digital payments have been allowing people to access goods and services during quarantine, they are accompanied by their own set of hurdles. Consumers often end up dealing with payment failure issues while making payment through apps, or face delays in receiving OTPs while paying via plastic cards or other digital modes of payments.
Although several merchants have launched their in-house payment gateways and wallets, the issue with digital payments remains unaddressed due to multiple friction points, which eventually disturbs the entirety of the payment experience.
This is where digital credit platforms come in the picture with their buy-now-pay-later (BNPL) services that essentially allow consumers to pay for services and products online, without spending their own money. BNPL aggregates all the expenses a user has incurred and sends a combined bill at a prescribed date.
New-age digital credit platforms emerging as game-changers
In the wake of this booming online shopping during the quarantine period, a few fintech companies have rolled out their small, unsecured cash advances, without charging any interest. These players leverage modern technologies to digitalize the ledger system, reviving the same
foundation - trust. Interestingly, buy now pay later is not a novel concept for Indians. It goes back to the age-old times when consumers and retailers followed the khaata system of payments; where the entire bill amount was paid in one go, usually by month-end, rather than payments made during every purchase.
Taking inspiration from the traditional practice, modern fintech players are now doing the same thing, but digitally. For instance, consumers can buy groceries, food, medicines, etc. online and pay the total sum of the amount, later.
While the digital khaata systems may resemble the humble plastic money in some ways, they are much more; they eliminate the requirement of multiple authentications. The virtual khaata platforms are far more secure for consumers and merchants as they offer risk-free one-click check-out and require no CIBIL score, intrusive personal data, or a fine print of the buyers.
Moreover, they are merchant-first and consumer-centric as they don’t charge interest to customers and have lower merchant fees. This makes it accessible to more customers with a wider variety of profiles.
Meanwhile, for the merchants, a digital khaata system can be beneficial in terms of basket-size, purchase frequency and cart-conversion. This can drive the growth of the merchant community and help them augment their respective businesses by going beyond the boundaries of payments.
Digital rebound to help accelerate growth in the Indian economy
Before the COVID 19 outbreak, 60 percent of transactions for online shopping were taking place via cash. Given the stress on income across households, consumer payment behavior has changed.
Pay Later and cardless-EMIs have become some of the most preferred modes of digital payment. This transition can be credited to companies that are quick adaptors of the contactless service and have aligned the same with their current operational strategies by eliminating cash transactions, ensuring safety.
Moreover, the Central Government is constantly encouraging consumers to adopt digital payments and avoid dealing in cash. All these factors when combined, indicate that the future of payments is heading towards digital, and slowly but steadily inching towards making it a necessity, accelerating India to rise as a digital-first economy in the post COVID era.
Nityanand Sharma is Founder & CEO, Simpl. Views are personal
First Published: IST