Innovations in digital payments are growing: Manoj Adlakha

Has the pandemic improved the prospects for India’s fintech ecosystem?

Absolutely, the pace of innovation required in the current ecosystem and the speed at which it needs to be deployed have only made the environment more conducive to the Indian fintech ecosystem. It is a play of partnership between the financial services majors and fintechs who can collaborate to speed up the availability of financial services to a wider base. The pandemic has propelled the adoption of safe and secure payment options with a greater focus on contactless and digital payment solutions. Digital payments as points of sale both online and offline continue to grow at a healthy rate.

Do you see the dependence on digital payment platforms like UPI gateways, mobile wallets as the way forward?

While India is still a cash-major economy, there has been a definite and ongoing shift towards digital. With only 10% of consumer spending currently on digital, I believe there’s a lot of room for every player. UPI and mobile wallets will have a role in evangelising adoption, but these modes are restricted by small ticket size. Therefore, for large value spends, customers will gravitate towards cards, given the safety and convenience factors, like interest-free period, capacity to earn while you spend via rewards programmes, global validity and usage, as well as a state-of-the-art secure transaction environment and fraud protection.

How has the pandemic affected the reach of digital payment platforms in India?

With extensive mobility restrictions along with physical currency carrying a potential risk of virus spread, the pandemic has led to increased adoption of all kinds of digital payments, both offline and online. A Capgemini research found that ~75% of Indian consumers reported greater use of digital payments since the virus outbreak and 80% will continue using digital payments as preferred mode. There are categories that have benefited disproportionately—such as healthcare, everyday essentials, groceries, insurance, health & hygiene, savings, even OTT and entertainment.

Was the industry forced to come up with new innovations to tackle the pandemic?

In the payments space, the pandemic has accelerated and pushed the growth of digital payment innovations that have been available for some time, such as link-based payments replacing some of the cash on delivery payment methodology. It has also forced the industry, as a whole, to invest more in safety and security features, to enable safer digital transactions and experience. We noticed that customers increased their online spends and also preference for app usage.

There is now a need and demand for no-touch ways of doing everything from ordering food, to making payments, to shopping. If we now walk into a restaurant, there are apps to order for dine-ins, QR to scan and check menu cards, pay via a link sent on your phone number using a variety of digital payment modes. Globally, face recognition for payments, wearables-based payment wallets are being tested and have shown decent results in a closed environment, I believe all this and more is going to become part of the new normal very soon.

Other than UPI, what other digital payment mechanisms show signs of growth in India?

All kinds of digital payments have shown an uptick, for example credit cards. At Amex India, we have witnessed an overall spike in online share of spending, with the category growing from 50% in the pre-pandemic era to nearly 80% of portfolio spending now.

Consumer spending has gravitated to online purchases as the pandemic has constrained the opportunity to spend offline, in stores, malls, shopping outlets or at dining establishments. We are witnessing an increase in online spending in certain categories with a 25% uplift in utilities, education and insurance.