Digital payments spring back in June after a blip in April transactions

Digital payment transactions through the Unified Payment Interface (UPI), operated by the National Payments Corporation of India (NPCI), cards and mobile wallets have made a near V-shaped recovery this month.

Volumes had plunged ~ 60% in April. The transactions nosedived to 999 million due to the imposition of a nationwide lockdown halting all except essential services. This has been the sharpest month-on-month fall on the platform since its operations in 2016.
Online payments picked up pace from May with the phase-wise opening up of the economy.

UPI processed 1.23 billion transactions worth Rs 2.41 lakh crore until June 28, the most value recorded by the channel in a month.

Rise in UPI transactions (Rs crore):
Feb (pre-COVID): 222,500
Apr: 151,100
May: 218,300
June (till 28th): 231,800

Reasons for growth of digital payments:

• Introduction of cashless modes of payment & contactless delivery

• Concerns of virus spreading through physical exchange of currency

Ambarish Kenghe, Senior Director, Google Pay, said, “COVID-19 has accelerated the shift to digital.”

Digital payment gateways dominantly used include Google Pay, PhonePe, Mobikwik, Paytm & Amazon Pay.

Categories showing spurt in digital payments:

• Utility bill payments
• Mobile recharge & OTT
• Online grocery, pharmacies & electronics
• E-commerce
• Taxes, fines & maintenance
• Telemedicine
• EdTech

India’s retail digital payments were expanding with retail digital volumes at 56% CAGR from Dec’15-Dec’19 & value expanding at 30% CAGR.
Jan Dhan–Aadhaar–Mobile (JAM) is an initiative by the Government for the transfer of financial assistance funds directly to bank accounts.

To promote digital payments and discourage exchange of cash, banks had temporarily waived off fund transfer charges on digital platforms -NEFT & RTGS and the ATM charges.
The Finance Minister and the CEO of the NPCI have also urged people to increase the use of digital payments to make payments contactless.
Government’s pledge for the provision of monetary assistance to the poor via direct transfers to bank accounts also gives a boost to digital payments in India.

NPCI has fast-tracked the on boarding system on UPI or UPI-QR to make it totally contactless and fully online. It aims at helping small businesses in building an online presence in a short span of time.

Debit and credit card transactions have seen an upward trend with respect to volume & value. Some of the prominent banks – Axis, Kotak Mahindra, RBL and SBI – are of the opinion that card-based transactions are gradually reviving. They have returned to about 70-80% of pre-COVID volumes.

Debit card payments have seen a growth from May-June. However, the recovery has been sharper for payment via credit cards.

Potential future of digital payments:
• Increased usage of DBT rails by governments
• Increase in customer awareness; greater adoption of cashless transactions
• Implementation of stringent security measures
• Encourage E-commerce amongst small and medium businesses
• Contactless payments – QR & SMS link-based payments will see an upsurge

Do you think consumers will accept digital payments as the new normal even after the pandemic settles?
Do you think the era of cashless transactions is here to stay forever?
Are we heading towards an era of cashless transactions/digital payments or is this a temporary phase?