The pandemic has changed a lot more than the way we interact with people around us. It has altered the way consumers and businesses pay and want to be paid, and this is a change that is here to stay. Nearly four in five consumers have changed the way they pay since the start of the pandemic, including shopping online whenever possible, using contactless payment methods at checkout and using less cash1. Commerce, whether retail or in business, came to a grinding halt across nations as borders closed and inter-state movement became restricted. In India, a prolonged lockdown with intermittent easing of restrictions has stretched for nearly half a year, and consequently impacted businesses across the board as face-to-face and online transactions slowed down.
A ‘new normal’ defined by social distancing, financial uncertainty and shelter-in-place have driven a preference for essential and healthcare spends and an inclination towards e-commerce. With many first-time buyers also experimenting with e-commerce, there is a need to make online payments simple, seamless and frictionless. As people shop and pay online more frequently, convenience will be key and card-on-file will become ubiquitous across categories.
However, the bulk of how India transacts is essentially ‘offline’, relying on in-store experiences to make purchase decisions for both essential and discretionary, as is seen from the gradual recovery of retail goods, apparel and electronics. The need for social distancing, personal safety and less-touch experiences then naturally extends to in-store payments as well. Though there has been a conscious reduction in discretionary, we are witnessing growth in newer categories for contactless transactions such as in pharmacies and drugstores.
A recent Visa study (June 2020) revealed that contactless payments have become a driving differentiator with nearly two-thirds (63%) of consumers surveyed saying they would switch to a new business that installed contactless payment options. As more consumers embrace contactless payments on the back of affordable payment acceptance infrastructure, the current pandemic has the potential to transform the way consumers transact, much like was seen in Chinese e-commerce during SARS outbreak in 20132.
Contactless as the new norm
For any form factor to become a habit, there are 3 factors that should be in place – unambiguous adherence to security standards, regulatory support and ubiquity of the payment instrument. Reimagining commerce in ways that both reduce contact and enable new digital experiences is critical for businesses of every size. As less-touch payments began assuming importance in the past few months, regulators in more than 55 countries raised the limit of contactless transactions and, in most cases, doubled them to drive convenient face-to-face commerce. The RBI too has raised the limits of contactless transactions in India so consumers can transact safely by tapping their card and entering the PIN for transactions above INR 2,000. Consequently, a few issuers have taken the lead in promoting and rewarding contactless card usage among consumers. This move, combined with cashier education, will give a major push to contactless payments in the coming months, given that roughly 80% of transactions are below INR 2,000.
In a country with the second largest smartphone penetration in the world3 and a mobile internet user base expected to swell to over 500 MN by 20234, mobile phones continue to be the centre of everything payments. As an increasing number of fintechs explore ways to accelerate payment acceptance, technologies like tap to phone will enable merchants to accept contactless payments on their smartphones without needing hardware like POS terminals. This is a result of a collaborative ecosystem and a futuristic regulator who plays a crucial role in advancing digital payments, as seen with the setting up of the PIDF (Payments Infrastructure Development Fund). When the acceptance of tapping to pay is equitable to the issued credentials or instruments, it can truly form a habit across consumer segments.
Multi-layered security to drive new consumers in card not present transactions
With ecommerce adoption getting accelerated, a 2019 CyberSource Masters of Balance report states that 83% business leaders rate e-commerce fraud management as extremely important to their business strategy5. With more consumers coming online, a safe and simple checkout experience is imperative for building repeat customers. Though tokenisation has been around for some time, its widespread adoption will help merchants provide smoother, safer payment experiences and, in turn, drive stickiness. As businesses pivot towards scaling their digital presence, a combination of AI and ML solutions can enable merchants to rethink their readiness for events like annual sale periods and protect their customers from fraud. With payments increasingly becoming a tool to drive consumer engagement and strong sales, the balancing act between convenience and security will be the key differentiating factor for businesses in near future.
The path to recovery by going digital
With consumers increasingly becoming digital-first, efforts need to be taken to enable this transition for smaller businesses too. 40% of merchants are inclined towards adoption of technology in India6, leaving a huge opportunity for widening the net of digital payments. Hence, together with a series of interventions by the Government, innovation in payment form factors will continue to play a key role in the nation’s drive to a less-cash economy. During such testing times, these building blocks could accelerate the pace and scale of digitisation, enabling individuals, businesses and economies to thrive.
- Arvind Ronta, Head – Products, India and South Asia
1 Jack Forestell byline – Contactless Payments Will Fuel Recovery. Here’s How.
2 How digital payments can help countries cope with COVID-19, other pandemics: Lessons from China
3 India surpassed the USA to become the second largest smartphone market in the world reaching 158 MN shipments in 2019
4 Number of mobile phone internet users in India from 2015 to 2018 with a forecast until 2023
5 CyberSource Masters of Balance 2019
6 Sentiments of India- pulse of the country, kiranas: EY