Over the past few years, almost all the players in the ecosystem including banks, card schemes, e-wallet companies, tech giants and fintechs have been successful in launching innovative payment solutions for consumers and merchants alike. Here are some indicators that are leading towards mass adoption of digital payments.
New payment instruments:
In addition to traditional mode of payment instruments like debit and credit cards, mobile wallets and Unified Payments Interface (UPI) witnessed significant surge in transactions due to cash crunch in demonetization phase. While the cash is back in the system, users continue to leverage the convenience offered by these platforms and use them interchangeably. Rise in number of affordable smartphone, low-priced data connections and user friendly apps is paving the way for digital payments through mobile wallets and UPI.
While there was an 18.4% increase in the number of transactions done on mobile wallets (1.08 billion) in Q2 of 2019, the increase in the number of transactions done on UPI (2.27 billion) over the same period was a massive 263%. UPI has already achieved over 5 billion transactions since Jan 2019 and is set to clock 1 billion transactions a month in near future. Its integration with third-party apps like Google Pay, PhonePe etc. and association with about 145 banks has provided impetus to person-to-person (P2P) as well as person-to-merchant (P2M) electronic payments.
Digitalizing micro payments in transit:
It is interesting to note that cash is being replaced by electronic modes for micro payments in transit. Implementation of FASTags and National Common Mobility Card solutions is changing the social habits of consumers as they are getting comfortable with scanning QR codes, loading tags and using contactless cards for making payments at acceptance points. Consumers can load the tags and NCMC cards online for a complete cashless experience.
Within a short span of time, FASTags have covered over 500 national and state highways and achieved 5.46 million tag issuance numbers. On the other hand, contactless cards based on NCMC platform are now facilitating customers to pay digitally at metro and bus stations in addition to retail outlets. The idea is to use single interoperable card for all type of payments.
The Future of payments:
Financial payment instruments are getting seamless and interoperable with each passing day and there is a possibility that today’s payment channels may get obsolete with the rise in technologically advanced solutions as we move ahead. We have definitely come a long way from traditional zip zap POS machines that used to facilitate card transactions to Android based smart POS terminals that accept not only cards but also other forms of payments like QR, UPI, NFC based cards and wearable etc. The new POS terminals are full touch screen, compact and stylish machines that improve operating experience and ensure faster checkouts. It also supports all kinds of value added services like EMI options, Loyalty programs etc.
Simultaneously, our traditional cards are being upgraded to EMV chip contactless cards and wearable like watches and wrist bands are enabling bank-to-bank fund transfers on-the-go. Tech giants are rolling out Internet of Things (IoT) based smart homes, connected cars, in-store retail experience by integrating payments to provide convenience to users.
Moreover, personalization through advanced analytics, Artificial Intelligence (AI) is being used to analyze consumer purchasing pattern and offer best deals on purchases. It can also predict fraudulent transactions and alert the stakeholders in case of any unwanted activities. Open banking through Application Programming Interface (API) emerging as a promising tool to accelerate innovation in payments space. It is helping banking institutions as well as fintechs to enhance their service offerings, improve engagement with their customers and also build new revenue channels.
To conclude, exchange of goods and currencies is not a new concept and money itself has evolved since 600 BC. From coins to bank notes to cards, we have now reached a stage where a host of real-time digital payment services are available for the masses. In India, it is evident that there is a constant attempt by the ecosystem to provide payments infrastructure to consumers and with appropriate financial literacy and trust, consumers will definitely embrace new age payment methods.
Disclaimer: Views expressed are solely that of the author and should not be construed as the official view of this publication. Vishal Maru is SVP Merchant Payment Services, Loyalty and Digital Payments at Worldline India.