The novel coronavirus (COVID-19) outbreak has traversed around the globe and has infected over 1.7 million people. What started as a supposed epidemic quickly emerged into a pandemic, leading to a public health and economic crisis of epic proportions. Businesses across industries and sectors have experienced a first-hand impact of the virus outbreak due to the ongoing nationwide lockdown, manpower shortage, and supply chain issues.
Some sectors like travel, aviation and logistics have come to a grinding halt, whereas the rest are operating at limited capacity. Despite the severity of the present scenario, the digital payments segment stands to benefit tremendously from the pandemic in the long run. Let us see why.
Reluctance to handle physical cash
Indians heavily relied on cash for everyday transactions until recently, especially those residing in non-metros and small towns. The rapid spread of coronavirus positive cases in the country, however, has necessitated a transition from bank notes to digital payments. The coronavirus is highly contagious as it can survive on inanimate objects and different surfaces. While no concrete evidence suggests that COVID-19 is transferrable through the exchange of currency, experts believe the virus could latch on to paper money. Driven the fear of contact with a potentially contaminated surface, people are switching to more sanitary options, i.e. digital modes of payment, including UPI-based platforms, mobile wallets, internet banking, and mobile banking, among others.
A collective push towards digital adoption
The Government of India is encouraging its citizens to eschew cash and engage in contactless digital payments. “This is the time to ensure social distancing. Digital payments help you do that. Let’s listen to these stalwarts and adopt digital payments,” said Prime Minister Narendra Modi in a recent tweet. The Finance Ministry and large banks, too, have been urging people to use digital payment tools in wake of the coronavirus contagion. Not just that, many public and private sector banks have decided to waive off charges on digital transactions for a temporary period to boost the adoption of non-cash payment options. The Indian Banks’ Association (IBA) has also asked customers to leverage digital banking services and avoid visiting physical bank branches as it could pose a health hazard to bank staff. Besides the government and financial advisories, retailers and e-commerce businesses have been encouraging their customers to make payments through digital channels.
Seamless customer experience
Digital payment platforms – both B2C and B2B – had already been witnessing an upward growth before COVID-19 struck. According to a Reserve Bank of India (RBI) report, digital transactions in India registered 19.5% in value in 2018/19. This growth was primarily driven by startups leveraging cutting-edge technology to cater to the specific requirements of each customer. The present crisis yet again highlights the need for consumer-centric innovations in digital payments – be it in terms of service, security and user experience (UX). With a sudden surge in demand, many digital payment providers are bringing into play contingency plans to handle high volumes of payment. They are leveraging advanced technologies like artificial intelligence, machine learning, and IoT to forecast the demand, manage customer queries and provide additional layers of security. Likewise, some digital payment firms are taking this time to build in-car payment ecosystems.
The road ahead: Will India finally become a digital economy?
Post demonetization, India witnessed increased adoption of digital payments among its citizens. With an overnight ban imposed on high-value currents and the subsequent cash crunch, consumers, as well as merchants, had to turn to digital modes of payment. A similar trend is being observed in the country now. Digital payment platforms like eWallets, UPI-based apps and net banking have seen a sharp jump in the number of users following the coronavirus outbreak. At the same time, transactions through debit and credit cards have also seen a major spike over the last couple of weeks. Of course, there has been a payment-volume decline in certain sectors including airlines, hospitality and tourism, and luxury retail, but digital payments across e-commerce, remote ordering and low-value transactions have grown tremendously.
The depth and extent of the impact of COVID-19 crisis on the entire digital payments industry cannot be gauged right now. In the long term, it will likely accelerate the adoption of digital payments by ears across the country. As such, the coronavirus pandemic could prove to be a major turning point for India’s journey towards a fully digital economy.