Virus Increases Digital Payments in India Where Failed

Virus Increases Digital Payments in India Where Failed

Virus Increases Digital Payments in India Where Failed

The coronavirus outbreak may finally achieve what India's shock demonetization failed to achieve four years ago: the use of digital payments is booming from grocery stores, energy bills and cab fares for all. The value of Unified Payments Interface transactions, a platform created by India's largest banks in 2016, reached an all-time high last month as people were afraid to handle banknotes in the midst of the pandemic. Transfers of electronic funds from banks, which had fallen in April as economic activity slowed almost to a halt, have rebounded.

Customers who have never paid a bill online are paying online , people who have never purchased online grocery stores are shopping online, "said Nityanand Sharma, chief executive of Get Simpl Technologies Pvt Ltd., which allows people to order online grocery stores and foodstuffs and pay every two weeks. "In the last three months, something that would have taken five years has happened."

The government of Prime Minister Narendra Modi has long tried to move through digital payments for India, where three of four customer transactions are done in cash. In November 2016, Modi abruptly invalidated most of the high-value currency notes in the country — a step aimed at curbing corruption which, he later noted, would also help promote a push toward digital commerce.

Originally, digital payments increased as people struggled to get banknotes, but they returned to cash as the number of circulating bills increased again. Now the pandemic that has made people suspicious of near personal connections is giving a fresh boost to online payments. It is a consumer-led push towards digital payments, "said Sharma, who has seen transactions double since April on his website," unlike demonetization, where no currency supply existed. "Sachin Raje, a 36-year-old Mumbai-based real-estate industry entrepreneur, is a recent convert to digital payments.

Last year, India's Reserve Bank said it planned to raise digital transactions from approximately 10 per cent at the time to about 15 per cent of gross domestic product by 2021. The government is aiming at a billion digital transactions a day, as the fastest-growing smartphone market in the world empowers customers to transact with a button press.

Global tech giants like Amazon.com Inc. and Alphabet Inc. are making bets on India's digital payments market, expected to quintuple by 2023 at $1 trillion. They 're competing with Alibaba-backed local startup Paytm, and Facebook Inc.'s WhatsApp Pay — still in their country testing stage — among others, to get a piece of that pie. For now, the businesses are racking up losses as they give lure consumers discounts and cashbacks.

Latest surveys say the time has come for them. Three-quarters of Indian consumers have registered increased use of digital payments since the outbreak of the virus, and 78 percent plan to continue to increase their usage over the next six months — the highest figures among 11 countries surveyed — according to a recent Capgemini Research Institute study. Another Facebook and Boston Consulting Group report showed an rise in online payments in India since late March after a national shutdown to monitor the spread of the virus, and said there's a high possibility that the trend will continue in the next six months.

India's per capita digital payments have risen more than five times since 2015, to 22.4 transactions in the year ended March 2019, RBI data show. That's still well below China, where in 2017 they saw 96.7 cashless transactions per person. And India is still far from cashing out its conventional addiction to cash. "While cashless transactions could now expand at a faster rate than would have been the case in a virus-free world, cash will remain the key payment mechanism for a long time yet," said Darren Aw, an economist with Capital Economics Pte. Singapore.

India's per capita digital payments have risen more than five times since 2015, to 22.4 transactions in the year ended March 2019, RBI data show. That's still well below China, where in 2017 they saw 96.7 cashless transactions per person. And India is still far from cashing out its conventional addiction to cash. "While cashless transactions could now expand at a faster rate than would have been the case in a virus-free world, cash will remain the key payment mechanism for a long time yet," said Darren Aw, an economist with Capital Economics Pte. Singapore.

“In large part, digital payments are an urban phenomenon, "said Rahul Bajoria, an economist with Barclays Bank Plc. Mumbai. "Nevertheless, even as overall digital payments declined during the first weeks of India's lockdown as most companies shut down, gains were seen for critical services that continued to operate – grocery stores, hospitals, smartphone top-ups and utility payments. Even in small cities, the virus has "quickened the speed of digital payment adoption," and there is a huge demand from merchants for contactless payment solutions, said Navtej Singh, Chief Digital Payment Officer with Hitachi Payment Services Ltd. In comparison to the days of demonetization, as organized retail has received a bigger boost from digital transactions, small grocery shops now stand to profit.