The pandemic has contributed to consumer behaviour increasingly veering towards digital payments, says T.R. Ramachandran, group country manager, India and South Asia, Visa
Digital payments have been accelerating in India for the past few years, and covid-19 has given it a further push. In an interview with Mint, T.R. Ramachandran, group country manager, India and South Asia, Visa, discussed what lies ahead for the industry and the innovations that will drive it. Edited excerpts:
Covid-19 has boosted contactless payments. What does this mean for the future of digital payments?
There has been a worldwide acceleration in digital shopping due to the changes in the way we live, work and buy. And this changes the way we have envisaged the future of digital payments. Digital payment have been around for quite a while but consequent to the pandemic outbreak, low or no-touch payments are likely to see an upswing.
We have seen contactless payments emerge as a preferred and reliable form of payment for millions across the world, due to its numerous layers of security that include EMV chip technology, real-time fraud detection systems, unique encryption and protection against data theft. In India, the momentum of contactless payments is picking up, especially over the last two years when there has been a significant growth in contactless card issuance as well as point- of-sale (POS) terminals. Covid-19 has further accelerated the usage of contactless cards among consumers and merchants alike, with grocery and pharmacy segments seeing an uptick.
With a number of new-to-digital consumers coming online, the focus on simple, seamless and secure digital payments will be the spotlight. Paying for purchases without having to enter numerous payment details, coupled with the introduction of tokenization, will demand intuitive payment experiences, which balance UX and security delicately.
With India fast becoming a digital economy with 700 million smartphones and estimated to reach 800 million internet users by 2023, we see the use of low-touch payments such as contactless payments becoming the new norm.
From a regulatory point of view, what can drive this and what might impede it?
Our forward-looking regulator has taken steps to boost the penetration of digital payments without compromising on customer convenience and security.Recently, a notable announcement by RBI enabled shoppers to make purchases of above ₹2,000 using their contactless cards by entering the PIN.While this is a step forward, there is scope to allow contactless transactions of higher values without having to enter a PIN. This move would then be in line with what authorities, banks and networks in over 55 countries have done to set higher transaction limits for contactless card payments.
While contactless payments have registered a healthy growth and all consumers have been receiving contactless-enabled payment cards, the level of awareness among consumers is still low, giving rise to misconceptions around the security of contactless cards. Hence, we believe that the announcement on setting up of the Payment Infrastructure Development Fund (PIDF) has come at the right time. This would help increase awareness around contactless payments in tier-III cities and beyond, while at the same time help set up asset-light infrastructure for acceptance of new modes of payment.
E-commerce has also seen a significant increase in buyers. Do you see this trend continuing post-covid-19?
Globally, covid-19 is accelerating the already rapid adoption of e-commerce and new, next-generation retail experiences. Major shifts in consumer behavior have occurred around the globe as a result of the overarching need for a touch-less experience at the point-of-sale.
In India, e-commerce can currently service more than 95% of the country’s PIN codes and the consumers’ appetite for online shopping is rising. With in-store shopping severely limited across all categories of businesses, buyers are seeking out robust digital commerce experiences like never before. As new buyers experience digital commerce for things such as groceries, meals and household staples, we expect these newly formed habits to last. With new sets of consumers adapting to digital shopping to maintain social distancing norms, even smaller merchants or kirana stores are migrating or keen to migrate online.
What innovations will drive growth in the digital payments space?
Innovations that keep convenience, security and superior payment experiences as priorities will drive digital payments growth. The ‘tap to phone’ feature in smartphones will play a critical role in consumer and merchant adoption of digital payments. Merchants can use smartphones as a payment acceptance device and benefit from the lower device costs compared with the traditional PoS machine.
The spotlight will be on open data and open banking as more players look to collaborate and benefit from network effects. It is the exchange of value, from physical currency to digital money to now data, that will necessitate the open movement of data, governed by those who have the expertise and processes to do so. The third piece we see coming to life is the unbundling of payments. With a vast array of players, including networks, fintechs and neo-banks, in the payments chain, innovative businesses will focus on improving specific parts of a payment experience and plugging into the expertise of other players.
Security is still a major concern for Indian users when it comes to digital payments. Will this change, going forward?
Security has always been at the center of design when it comes to developing solutions. Improving payment experience at identified consumer pain points such as risk of failed transactions, insufficient internet connectivity and data privacy concerns will be vital for consumers to join the digital payments ecosystem and remain in it.
While the pandemic has contributed to consumer behavior veering towards digital payments increasingly, there has been an apprehension around the security of digital payments. Hence enhanced security features such as tokenization and AI in real-time fraud analytics will reduce this fear and induce consumer trust in transacting digitally.
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