Authored by Samir Kapur
The COVID-19 pandemic is having ramified impacts on economies and financial markets worldwide. While organizations across multiple industries and segments are rethinking of ways, revisiting strategies and realigning innovations to steer clear of the obvious economic juggernaut that the COVID 19 pandemic is bringing to the fore, business activities will take some time to rebound back to normalcy.
With dismal economic health facing all sectors, the digital payments segment is no exception and is expected to follow a similar trajectory for the time being, at least to a certain extent. However, experts opine that the industry’s innovation potential and its general resiliency will help it to adapt to the new normal, rather swiftly.
As the lockdown to contain the proliferation of the virus has severely impacted sectors such as manufacturing, auto, retail, aviation, tourism, entertainment, and hospitality, digital payments have also taken a hit as they are closely linked to these sectors.
With restaurants closed, travel banned and consumers becoming more frugal in spending money, the digital payment sector had been facing disruptions with decreased volumes of transactions. Also, with borders sealed and cross border movements of goods restricted, both B2B and C2B payments faced headwinds.
However, with recent relaxations coming into play, much of these sectors are expected to witness significant revivals. In hindsight, the lockdown has spurred the increased adoption of digital payment solutions in areas such as online grocery stores, online medical stores, OTT players (telecom and media), EdTech platforms, online gaming, recharges and utility/bill payments.
With the implementation of social distancing norms and contactless payment regulations, the Government and the National Payments Corporation of India are also encouraging people to actively use digital payment options.
Lockdown has fast-forwarded the adoption of digital payment solutions by a couple of years.
This is corroborated by the fact, as per a recent report released by Capgemini Research Institute, 80 percent of Indian consumers between the age group of 56-60 years showed the highest usage of digital payment channels during the pandemic, which is anticipated to further amplify over the next six months. This was followed by the age group of 36-45 years at 83 percent.
The report further says that the usage of digital payments among Indian consumers in the present scenario stands highest at 75 percent, followed by China (63 percent) and Italy (49 percent). The global average is 45 percent.
Therefore, digital payments, once considered to be a flexible and convenient mode of transaction, are now becoming a towering necessity, even though a few sectors that largely contribute to this industry are in a state of temporary fluidity.
The government, banks and the RBI are also urging people to use modes of payments and fund transfers such as mobile banking, mobile wallets, cards, NEFT, IMPS and UPI to minimize social contact.
Physical handling of cash poses a major risk of COVID-19 contamination as it makes way for unregulated human interactions.
With countries across the world deploying some or the other form of lockdowns and restrictions on movements, digital payment players are optimistic about a brighter future.
UPI payments in India also witnessed stellar growth volumes throughout lockdown and this gradient is expected to snowball further in the coming months, once lockdowns are lifted completely. NPCI is also considering to enable international cross border payments on UPI, as it will play a crucial role in curtailing instances of fraudulent activities.
The 2016 demonetization had caused a behavioral shift towards digital payments, primarily driven by the paucity of available cash and the early adopters were keen to use the platform.
However, COVID 19 scenario has acted as a second wave of behavioral shift that will push the majority of the users to adopt this platform as now it is more about convenience and the importance of adhering to safety precautions, given the increasing number of Corona positive cases. Even card payments are an extension of physical touch and that is also questioned now, given the situation at hand.
It is also important to note here that, during the SARS epidemic in 2003, China expedited its process of launching digital payments and e-commerce across the country.
Now, as economies start to heal from the COVID-19 pandemic, digital payments are expected to rule the roost by helping people reduce contact with the virus.
Contactless payments at the point of sale enabled by smart features such as facial recognition, Quick Response (QR) codes, or near-field communications (NFC), can greatly reduce instances of virus infections.
Since it enables transactions from the comfort of homes, eCommerce activities also saw an uptick, helping small businesses keep their revenue avenues flowing in these times of uncertainty.
Samir Kapur is an independent consultant
First Published: IST