By: Ashwani Rathore
The current looming Coronavirus pandemic has affected the global economy, and almost every sector has to brace itself for the unprecedented outcomes. The economic repercussions of the outbreak are going to be massive and have already started impacting many sectors. According to Fitch Ratings, the Indian economy is likely to contract 5% in the current fiscal owing to the economic slump due to the current situation.
We are constantly hearing of lockdowns and measures to beat the impact of the virus, but in parallel, the collateral damage that has happened to businesses has been extreme. Among the numerous precautionary measures, the outbreak is also encouraging the use of digital payments. Amid the current scenario, to ensure the safety of citizens, the importance of digital payments cannot be stressed enough. The National Payments Corporation of India (NPCI) has been urging Indians to use more digital methods, so that people do not step out even to go to the ATM.
To limit the spread of the disease by avoiding social contact and visits to public places, it is important to encourage the use of digital payments and adopt e-invoicing into every business. According to me, the pandemic has impacted digital payments in the following manner:
Awareness of digital medium to increase
COVID 19 has given rise to a digital wave, the number of monthly active internet users is currently estimated at 574 million and has registered an annual growth of 24%, indicating an overall penetration of 41% in 2019 as per ICUBETM report by Kantar. The lockdown has also introduced many first-time users who were not tech-savvy to the digital ecosystem and led to an increase in online transactions. It has brought a shift in our everyday payment habits and building proper awareness and education around contactless payments and online transactions besides undertaking other preventive measures also becomes important. The power of digitization has been seen in the past few months as companies helped consumers shop, pay for bills, converse, entertain, and collaborate with less physical contact. With consumers shifting to digital channels it would enable every business- whether small scale or large scale, to embrace digital practices into their process and facilitate financial inclusion at a macro level.
Make micro-businesses adopt digital payments
With so many companies and start-ups already working in the digital payment’s gamut, it has made the lives of small businesses easier, as they adopted online payment methods. Digital methods are being adopted not just for singular transactions, but for recurring payments as well. Micro-entrepreneurs like local cable operators, local Internet service providers, newspaper vendors, milk vendors increasingly prefer to adopt digital processes for payment collection than doing it manually. Usually, these businesses track their payments manually every month, but automated electronic invoicing clubbed with payments link will help them not just to maintain social distancing but also enable them to save their time and efforts in chasing for their payments .
Consumers will prefer contactless payments
About 74% of consumers in India will prefer carrying out payments through the digital medium in the next six to nine months, according to a report by Capgemini Research Institute on the effects of COVID-19 on consumption of financial services in April 2020. The current situation will give rise to customers choosing contactless technology that allows them to pay by tapping their cards to a point-of-sale terminal. These cards require less physical interaction and the transaction is faster. The usage of UPI and other E-wallets is also increasing the payment method of choice across a wide spectrum of consumers in the country. As consumers and merchants speed up their adoption of digital payments, it will become even more critical for every business to transition to the digital payments space.
Varied impact on different sectors
While some sectors that were directly hit by the COVID-19 outbreak have a reduced usage of the digital payments, some new sectors have also emerged to use digital platforms. Some of the segments that are expected to adversely impact digital payments in India due to COVID-19 include airlines, travel and tourism, hospitality, retail, theatres, restaurants, clubs and entertainment parks etc. During the lockdown with only essential services functioning, digital payment platforms witnessed a sharp jump in the number of users as cash transactions across the country see a decline. There has been an increase in transactions at fuel stations, utility payments, groceries, etc. Local Kirana stores, medical shops, gas services have adopted digital transactions to limit social contact as much as possible.
Consumers to prefer shopping online
Morgan Stanley’s report on ‘India’s Digital Economy in a Post-COVID-19 World’ projected India’s 670 million internet users to rise to 914 million by 2027 and online shoppers to jump to 590 million from 190 million in 2020. India’s online shopping population will witness an increase as online groceries and digitization of small business is shaping up. Customers are increasingly buying groceries and essentials online amidst the current lockdown and E-commerce companies are seeing an increase in demand for daily products such as fresh fruits and vegetables, milk, eggs, and personal hygiene items like sanitizers, soaps and household cleaning products.
Increased awareness against frauds
The digital revolution has brought an increase in online payments along with looming threats of fraudulent activities. Around 28% of consumers are now exercising more caution while making payments using various digital modes, according to a study conducted by YouGov and ACI Worldwide. According to the study, Vulnerability to fraud remains the biggest consumer concern when it comes to digital transactions (54%), followed by the risk of failed transactions (42%).However, it is encouraging that consumers have become extremely vigilant and cautious. They are showing heightened awareness of these frauds and a willingness to take the necessary precautions to prevent it.
Although the current scenario is very challenging and constantly changing, digital payments have experienced a surge in transactions. It has become instrumental in helping India embrace the digital revolution and I believe that the digital payments ecosystem will continue evolving rapidly to aid the emergence into this new normal.
(The author is Co-Founder and CEO, SpiderG and the views expressed in this article are his own)
