In such an environment, have the volume of digital payments increased or stagnated? Or has the Indian society and industries adapted to the new “normal” and redefined itself?
To answer these questions, let us look at some of the key areas where digital payments have been used this year.
1. Government assistance and social programs
Amid the economic lockdown caused by the pandemic, many low-income people have been affected by job losses or lack of work (due to social distancing). To assist their impacted citizens, governments worldwide, including the Indian government,have devised social programs designed at direct support to these households. For instance, under India’s Pradhan MantriGaribKalyanYojana, around Rs28,000cr was released to the country’s poor using digital payment channels.
2. Cash transfers
Along with government programs that have aided the economically weak in India and other parts of the globe, there has been a growing focus on the use of mobile money - thanks to the increasing number of smartphone users.
Given the focus on social distancing and cashless transactions in India (ever since the demonetization drive in 2016), mobile-based cash transfers have become the safe and effective mode to help out the economically-strapped section of the Indian society.
3. Online payments from Banks and Fintech companies
With the low volume of credit card penetration in India, online payments in the country are largely dependent on bank transfers and mobile payments. When it comes to effective bank transfers, banks and other infrastructure facilitators have played a crucial role in building the necessary payment systems for safe and quick transfers.
According to Statista, India is ranked 2nd (only behind China) in the penetration rate (at 29.5%) in the mobile payment segment for 2019. The growth of digital payment solution providers including Paytm, PhonePe, and the BHIM payment app in the country is a testimony to the growing trend of India’s detachment from cash.
Even before the COVID crisis hit the globe, cashless transactions in India were on the upward trajectory, thanks to the implementation of the Unified Payments Interface or UPI that enabled bank-to-bank transactions. According to a KPMG report, India has over 50 UPI providers and over 45 providers of mobile wallets.
4. Essential goods and services
At a time when non-essential services have been adversely impacted, industry sectors that fall under essential goods and services have largely been boosted by the digital payment infrastructure in the country.
This includes online retail sectors like groceries and medicines, along with utility providers in electricity, mobile phone services, and the OTT sector. Thanks to digital payments, the online learning or EdTech sector has largely benefited following the closure of schools and educational institutes.
With the shift towards digital channels and payments, most telecom companies have recorded an increase in online payments and recharge – along with a demand boost in high-speed broadband Internet services.
5. Online donations and fundraising
Among the major ongoing trends for digital payments in India, online donations made to NGOs have increased by 180% during the lockdown period. Thanks to the Government’s initiative, Indian citizens have also contributed to online donation schemes like the PM Cares Fund. Starting with an initial corpus of just 2.25 lakh Indian rupees, PM Cares Fund received over 3,000 crores from India and abroad – within its first five days in September. These online donations have largely been facilitated through digital payment channels.
Apart from online donations, crowdfunding or online funding platforms have been instrumental in contributing over Rs100cr,for the benefit of displaced migrant workers, daily wage laborers, and workers offering non-essential services.
Previously positioned as a convenience, digital payments have emerged as a life-saving necessity during economic lockdowns. With digital payments being encouraged by the Indian government and the National Payments Corporation of India (or NPCI), can it truly grow to create a future cashless society in the country? The signs are encouraging – but only time will determine its long-term outcome.