CA Ruchika Bhagat, MD, Neeraj Bhagat & Co

Mrs. Ruchika Bhagat graduated from the University of Delhi in 1996. Two years later, she became a member of the Institute of Chartered Accountants of India (ICAI) in 1998. She is a strategic adviser in setting up businesses in India for foreign companies and taking care of its compliance. She specializes in Business Advisory, Tax, Regulatory and Risk Advisory

 

The Covid-19 pandemic has fast-tracked the digital development of India’s payment structure. According to the research, besides just widening the use of technology, this pandemic has also powered the growth of digital forms of payment. The total volumes of digital payments have increased from 1459.02 crore in FY 2017-18 to 4371.18 crore in FY 2020-21.

Since, this pandemic has triggered worldwide changes all across the planet, impacting virtually every aspect of human life. Total quarantine and maintaining distance have had a severe impact on the banking sectors and the whole country’s business operations, speeding up the general trend of “less cash options” and digital financial services. According to the World Economic Forum, the usage of cash fell many times throughout the epidemic, while digital payments grew more popular among the people. From buying groceries online, to booking a cab or even making a donation by scanning the QR code; Payment Digitalization has already bagged all areas of our lives. 

This pandemic has pushed e-commerce sector to the forefront of the retail industry. Prior to the pandemic, online purchasing was expanding at a constant 4.5 % per year, globally. However, the retail section has shifted dramatically this year, owing mostly to mobility restrictions designed to safeguard public health and a rising customer inclination to avoid physical stores and establishments. 

All this while during pandemic, the government regulations have also promoted digital payments such as National electronic funds transfer (NEFT), Immediate payment service (IMPS), UPI, BHIM, and others to minimise the use of physical currency, which has a higher risk factor of COVID-19 transmission. Such efforts, coupled with economic openness, are evident in the rapid recovery of different digital payment systems on NPCI in a very short period of time. This clearly shows that the digital payment ecosystem in India is likely to adapt swiftly to define post-COVID-19 growth.

Few reasons behind the behavioural change towards digitalization during Covid:

Establishing Customer Trust through Hassle-free payments: Today’s digital payment techniques are so quick that they may be finished in a matter of minutes. With the use of OTP’s (One-Time Password), customer feels safe while making the transaction online, as it is the second level of security which the bank will provide in order to ensure that your transaction is as secured as possible. Biometric security and digital identities have also helped increase payment security to further enhance convenience and leave no space for uncertainty in the eyes of customers. The inclusion of cutting-edge technologies to enhance infrastructure would aid in the creation of a smooth and secure digital payments ecosystem.

Continuity: During the coronavirus outbreak, digital payments kept economies operating and helped individuals avoid virus contact. Contactless digital payments at the point of sale, such as face recognition, Quick Response (QR) codes, or near-field communications (NFC), can reduce the likelihood of the virus spreading through cash transactions. Digital payments are reducing in-person interactions and allowing people to purchase necessities from the comfort of their own homes. Increased e-commerce activities are also assisting small companies in keeping income flowing during an uncertain period.

Convenience: The simplicity of performing financial transactions is most likely the most compelling reason to go digital. No more need to carry large amounts of cash, plastic cards, or even wait in long lines for ATM withdrawals. It is also a more secure and convenient way to spend money when travelling.

Keeping Records: When transactions are digital, it has become quite easy for consumers to keep track of their spending.

Some key Indicators of Digital Payment Industry:

Payments done through NPCI: National Payments Corporation of India (NPCI) is an umbrella organisation established by banks under the supervision of the Reserve Bank of India. Growth trends in overall payments has been observed during 2020-2021, primarily strengthened by prospects of digital payments for tapping into untapped markets which used to run primarily on cash and fulfilment of accumulated consumption needs, as businesses built up the infrastructure to resume operations safely and efficiently and as consumers find safer alternative means to satiate their needs.

UPI, BHIM and IMPS: Following the relaxation of lockdown limitations in mid-May 2020, value transacted over UPI and BHIM in June 2020 regained 122% and 91% of their January 2020 levels, respectively. By June 2020, IMPS transactions had achieved 95% of their January 2020 transaction levels. Consumers exploring e-commerce avenues, previously catered by brick and mortar stores for daily needs, stocking of essentials, general resumption of routinely availed services, and cascading payment of any personal dues and liabilities are possible factors for the levels of recovery observed.

Bharat Bill Payment System (BBPS): Since April 2020, a significant proportion of the working population have resulted in an increase in average consumption of utilities along with such as electricity, water, gas, and internet, usage of cards, housing society payments, , an increase in over the top (OTT) payments for at-home entertainment such as direct-to-home (DTH) and streaming services, also, the beginning of academic year after June 2020 which has boosted payment of school fees, all currently integrated within BillPay infrastructure.

Lesser use of ATM’S: Cash in general is still viewed with trepidation and suspicion owing to concerns about the spread of the COVID-19 virus. A shortage of access to ATMs, and difficulties in ATM replenishment due to physical mobility restrictions during the lockdown resulted in a 52% decrease in cash withdrawals during last year. This is exacerbated by the unavailability of non-essential products and services during lockdowns, as well as the fact that cash on delivery is not accepted as a form of payment by the majority of firms offering essential services.

Increase in Digital Literacy: The Indian government has taken several initiatives to boost the digital payments space in India as Digital Literacy is crucial to ensure an ease in using digital payment modes.

Paradigm shift in consumer behaviour: People have now acclimated to numerous new methods, such as remote working, online education, and, most crucially, contactless payments, after being into the global health crisis for around 2 years now. For quite some time, the government has been on a crusade to push digitalization throughout the country.

Future of Digital Payments in India- The road ahead

Digital payment transactions have increased by 76 % in the last year, according to RazorPay, including many first-time digital payment users. Also, according to reports, the Indian digital payments sector is expected to reach US$700 billion by 2022. The Fintech industry will be more vigorous in terms of offering safe transaction facilities in order to grow and promote the country’s digital payment environment. Our country is already pacing up in block chain technology, cloud-based payments, cryptocurrencies, and other payment services powered by Artificial Intelligence (AI), Machine Learning (ML), and Internet of Things (IoT).

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