Digital payment adoption has grown significantly in the last year, reflecting a secular trend among Indian consumers and businesses, TR Ramachandran VISA Inc’s group country manager for India and South Asia said at during his address at the Digital Lenders Association of India’s 2021 Conclave on Wednesday.
While fintech payment companies have gained ground in terms of new users and merchants coming on-board and a large number of customers have demonstrating shifting expenditure patterns, Ramachandran said that the payments industry as a whole needs to step up to improve the customer experience. The industry also needs to ensure there is trust in the system from a cyber-security and data protection point of of view, he said. Ramachandran highlighted five important trends for the digital payments industry going forward:
1) Customers shifting to digital-first commerce
“Leading companies and brands are already powering cohesive omni-channel strategies that integrate mobile, online and instant commerce seamlessly. With in-store shopping severely limited across categories of business, buyers in turn are seeking robust digital-first commerce experience like never before,” said Ramachandran. “We expect these formed habits to last”, he said.
“Digital has taken centre stage last year with many offline and neighbourhood stores coming down in their business and many starting digital operations. As the economy opened slowly mid-year, businesses have started implementing new methods of delivery like buying online. In parallel, we saw a noticeable spike of first time e-commerce shoppers emerging from Tier-2 and Tier 3 cities. We think that this number will go from around 55 million in 2018 to 170 million in 2023. It is currently between 90-110 million,” he said. Even standalone mom and pop outlets now need to digitise and have an online presence, which means that payment gateways, payment aggregators and others will assume centre stage, Ramachandran added.
2) The rise of pay later
“When we think about the sheer range of pay later optionality—whether it is led from banks, whether it’s led from people in the middle who are pivoting off their earlier models and getting into lending or using data and aggregating that data to form lending decisions, or indeed coordinating/collaborating with merchants to form commercial arrangements as well as potential underwriting arrangements to do checkout financing at the point of sale—buy now pay later is a trend that has come to stay,” says Ramachandran. While the trend of contextualising data is becoming more and more prevalent for pay later financing, the seller system can also be used for lending opportunities, he said. Though there are stumbling blocks it is inevitable, he added.
3) The rise of contactless payments
“India has gone down the path of embracing QR on the one side, whether it is Bharat QR or UPI QR, as well as Tap and Pay for contactless payments or Near Field Communication (NFC) payments. It is not just cards but it’s also using NFC on mobile. Over the last three to six months, mobile phones have been used as a receptacle. Using an app-based device on an Android phone, called softPOS or tap to pay, merchants are now accepting payments through their phone,” Ramachandran said.
4) Dawn of super apps
Digital payments acceptance does not require heavy investment anymore as mobile phones can be used on the buyer and seller side, Ramachandran said. “HDFC Bank, ICICI Bank and players like MSwipe and Pine Labs are coming out with one app, a super app, a merchant facing app which can do it. So rather than having different apps for the shopfront, different for mobile website, different for payments, an app for Goods and Services Tax (GST), different for supply chain and inventory, how about we combine all of those into one application which can manage inventory, GST and provide data to the lender side of the ecosystem,” he said.
5) Cyber-attacks are the biggest risk for businesses
“While animal spirits around innovation, customer-first, convenience and instant commerce are welcome, we must not lose sight of the fact we are sitting in a nascent ecosystem where the customer and a variety of merchants are taking their first baby steps towards digital commerce and digital payments. None of us want a scenario of one step forward and two steps back. As we plan to plan to make this ecosystem less cash, as we plan to plan to make this ecosystem digital-first rather than digital-also, focusing and keeping a sharp eye out on cyber-attacks and cyber-security part is a point that cannot be over emphasised,” Ramachandran said. He added that while companies focus on making seamless and friction-less products, they must spend time on protecting customer and merchant data as well.