2020 was the year of lockdown, and all business activities were invariably dominated by COVID-19-induced decision-making. Almost every business, irrespective of its size or scale, was impacted. Most of the processes were calibrated keeping in mind the need of adhering to safety precautions owing to the pandemic. The reliance on digital payments increased, in a bid to keep transactions as contactless as possible. The technology that was already in place triggered swifter payments and allowed further expansion of the consumer base. People of all ages entered the fold, be it a school-going kid or an elderly person who would earlier scoff at the idea of online payments.
Accessibility, affordability, and better connectivity have been the key drivers for the adoption of smartphones in the past few years. Gradually, people have overcome tech-illiteracy and other barriers to attain a certain comfort level with these gadgets. The increased trust and heightened operability have paved the way for digital payments.
No wonder then, in 2020, we saw a growth in the sales of PoS machines and QR-based payment options even in tier-2 and tier-3 cities. The integration of UPI, interoperable payment applications, and digital wallets has made digital payments seamless and smooth. Merchants, retailers, and other businesses have embraced digital modes of payment led by players such as BharatPe.
Digital payment systems poised to grow in 2021
This uptrend is going to continue as the bigger customer base from 2020 is not likely to shrink, and will well continue into 2021 and beyond. This is because the customer behavior has undergone a sea of change. With customers trusting digital payments and realizing its convenience, chances are less that they will move away from this mode, even post the pandemic. The prediction by some that the market will be completely dominated by digital payments one day may not be far-fetched after all!
Even the government — that has over the past few years developed projects such as Aadhaar and UPI to create citizens’ digital identity — is continuously pushing for a Digital India. Among other initiatives is the recent initiative FASTag that enables authorities to collect tolls only through digital payment. There are many such steps across different segments of payment operations on the cards.
Some of the trends of Digital payments in 2020:
- Customers demanded contactless and/or contactless/ digital payment solutions due to health concerns
- Rise of integrated interoperable digital payment systems
- Digital payment space witnessed entry of several new age fintech companies
- Impetus in the form of enhanced merchant acceptance
- Increased penetration of QR-code based payments
- Biometric identification and authentication
Trend Forecast of Digital Payments for 2021 and beyond:
- Merchant acceptance network is poised to grow fourfold with low investment solutions
- UPI and its interoperability will drive large scale adoption of digital payments
- Payment will drive consumption and not vice-versa as access to customer transaction data will allow Payment Service Providers (PSPs) to offer relevant offers, deals and coupons influencing consumption decisions
- Consolidation of digital payment providers with customers preferring one universal application for digital payments thus forcing market players to cooperate or integrate
- Cash payments to digital payments ratio could be inverted with a higher percentage of digital payments and fewer cash payments
- Artificial intelligence and machine learning will allow further process automation and improve fraud detection
- Digital payments will be made in newer ways such as through wearables
The future for digital payments looks bright. With diversification of fintech services & offerings, and consolidation of the financial services sector, now is a good time to get on the digital payments bus, if you haven’t already.