Evolution of a new normal in digital payments post the pandemic

There has been a lot written about a new normal for digital payments because of the Covid pandemic. The new normal is a general reference to ‘contactless’ payments where customers do not have to hand over their payment instrument (phone or NFC card) to the merchant. The reality though is that the trend has been a long time in the making and will only accelerate from here on.

True, the coronavirus has negatively impacted in-store payments but this is only temporary and will likely bounce back as the dust settles – this trend is being seen worldwide as lockdown conditions relax. That said, it is clear what will drive digital payments:

1. E-commerce – This is a no-brainer. The trend towards e-commerce has been on since many years because of the sheer convenience of shopping from home as well as the improved logistics of delivering items within hours of ordering or within a day to two. This increased immediate gratification only means that this vertical will continue to rise and if anyone has any doubts on this, they only need to see the recent financials of firms in this space. Since this space is fundamentally aligned to digital payments of all sorts, there is a positive correlation between the rise of e-commerce and digital payments.

2. Government and regulation – This is critical to positively drive digital payments. This space is a high profile one and will always have some amount of regulations in place and perhaps rightfully so. Regulations, as is well known, need to be calibrated so that there is a balance between the benefits accruing to customers and allowing firms to grow in the space. Beyond that, governments pushing the adoption of digital payments will provide that extra fillip.

However, like regulators, governments also need to strike a balance to ensure that incumbents in the industry as well as newcomers have incentive to stay or enter and innovate. Given the low transaction costs of digital payments as well as increased tax revenues, it is in the interest of governments to do so.

3. User experience/delight – The ultimate user experience here is two-fold; one, providing a good user experience to the merchant and two, delight to the buyer. In both cases, it boils down to ‘seamless’. True, seamless is over-used but in the payments space, it is the front-centre-back of driving digital payments. A seamless experience here is one where the merchant faces no pain points at any point and where the buyers experience is faster and easier than paying cash.

4. Safety – Data breaches obviously have a negative effect on people putting their digital instruments on the internet. While hackers usually try to be ahead of the game, defenses against hackers are improving on a daily basis. Companies are investing significant sums of money to store and transmit payment information safely and a sustained effort here is the only way to convince consumers that their instruments are safe.

(By Sunil Rongala, Vice President – Strategy, Innovation & Analytics, Worldline India)