Time to embrace digital payments

By Ashwin Shenoy, VP sales, CEMEA, PayMate

As you start reading this piece, you are probably thinking ‘what’s a payment article doing at a time when the whole world is grappling with the coronavirus scare?’. We all are in a state of lockdown, exercising social distancing and restraint, and governments all over are doing the best they can to beat the situation at hand. And like always, we, the human race will come out on top. But what after?

A pandemic like coronavirus shakes the entire economy of any country, right from general businesses, stock markets, tourism and related industries, and batters the day to day lives of civilians. Most cities are in a state of lockdown, forcing people inside their homes, and converting buzzing cities into ghost towns. And when this happens, with the mass hysteria, you have a situation where everyone fears the worst, stock piling essentials, groceries and yes, running out of cash.

But an important question to ponder is : do we really need cash? In November 2016, when the Indian government announced the momentous ‘demonetisation’ of all INR 500 and INR 1,000 currency notes, the not-so-preferred digital payments infrastructure: Mobile wallets, PoS (debit & credit cards), UPI transactions went through the roof. The entire country learnt to live and get on with their lives without cash. And unlike the current situation, there was no dearth of such digital payment solutions. Paytm alone went from 125 million subscribers before demonetisation to over 185 million after (a staggering growth of 48 percent in three months), eventually snowballing to 280 million a year later. The problem of essentials never existed, and it was a win-win situation for everyone.

The demonetisation period was a classic case of acclimatisation, users quickly shifted loyalties and all believers of India being a ‘çash’ economy were wronged. Its about human psychology, if something works like a charm without costs and too much effort, it will be adopted without the blink of an eye. But wasn’t it also a classic case of ‘problem of plenty’? While Aadhar catapulted the launch & seamless operations of most of the fintechs in this space, they all realised that there was a share in this enormous pie for everyone, provided there was simplicity and enough incentives on offer. And though we consider it as convenience for consumers, we have to keep in mind the convenience at acceptance as well. Paytm, Freecharge, PhonePe and the likes did a marvellous job of tapping businesses and providing friendly solutions that would go on to make them the backbone in this digital revolution.

So what changes for us now? Coronavirus presents a peculiar situation in terms of managing payment instruments. True, post demonetisation, the digital acceptance plateaued and cash was back in the game, but the fantastic infrastructure is still there. Formites (objects or materials which are likely to carry infection) are a major cause of spread of the virus, and cash/cheques cannot be ruled out. These instruments are handled by dozens, right from initiating the payment till the instrument is finally realised. In South Korea, a single person was responsible for infecting 5000+, do we really need the risk of formites, that too with an instrument like cash, that changes hands more than 500 times in a two year period?

For businesses, the situation is even more grave as payments predominantly have been in the form of cheques, largely because of psychology and recourse. Logistically, these instruments are still hand delivered or collected, and deposited in banks on a daily basis, a practice that will serve as a catalyst in the radical spread of this disease. Despite robust platforms and channels available to these businesses to use cards & electronic payments, they still rely on such archaic instruments.  Imagine a situation where a business issues around 100 cheques a day, and all we need is the individual writing these cheques to be infected. A single infected case infecting two more will lead to 16,384 active cases in a matter of two weeks. Scary.

A lot of effort has to be put in to get everyone up this curve, and I personally think the following steps, if followed to the tee, will help us greatly in embracing digital payments and ruling out cash and cheques as go-to instruments:

  1. Education: Consumers should be aware that paying digitally is no different than paying by cash. The outcome remains the same. Plus, India is a land of great incentives and cashbacks. So, we need to make the most of it.
  2. Security: Most of the times, we discount digital models on grounds of being ‘too risky’. We need to understand risks associated with cash as well. There is absolutely no recourse if cash is lost, stolen or turns out bad (torn, or worst counterfeit). We have lived that tale. All fintechs should keep assaying their systems for potential threats, risks and be transparent with their customers. The government, RBI and schemes such as NPCI, Visa & MasterCard have done a wonderful job in relaying this message and comfort to everyone in the country.
  3. Engagement: Making digital payments fun and engaging is a critical element in the success of the model. Cash has the eternal advantage of touch, feel and anonymity. How does a wallet or UPI go one up? Google Pay hinged its strategy on incentivising through gamification. Brilliant idea. Consumers got hooked on to the app for the ‘fun’ portion and cashbacks more than just using it for making payments. As of August 2019, GPay had 60 percent of the UPI market share.
  4. Convenience: The payment application or channel should be convenient to adopt, use and yes, keep using. The human brain is remarkable, it can store years and years of data & perform complex tasks, but when it comes to having patience in an application journey, it snaps if troubled too much. That’s where GPay again hit home run. It performed most of the tasks itself in a simple manner, asking the user for little. Who doesn’t like it when the rewards and outcome is disproportionate to the efforts? GPay exploited this to the maximum, making it extremely convenient for the users and creating that stickiness.
  5. Availability: while we speak about users adopting digital payments, and lay emphasis about security, engagement, convenience, it’s would be a disaster if the acceptance infrastructure is poor and unavailable. The question then to ask is: I can pay by an app or UPI, but whom do I pay to? I personally have come across merchants in upmarket areas who still accept only cash. While that may be your DNA, but gone are the days when you don’t stand the risk of losing out on business or disappearing into oblivion because of this. Consumers carry multiple mobile payment applications with them today, and it’s fatal to not be accepting even one. The government has taken measures to ensure mandating acceptance at merchant outlets, but to carry the baton of this mandate and make it happen is on us.

The current situation of lockdown, curfew and complete isolation has in a way stamped this mandate, and with authority. Cash has lost its significance, to the point of becoming useless. People can’t get out, can’t withdraw money, forget writing cheques. Countries like South Korea said it was taking all banknotes out of circulation for two weeks – and burning some to reduce the spread of the virus, according to Reuters. Accepting and paying digitally is the new order, and we need to stick to it, we need to make it a norm, our culture. It has tremendous advantages and the potential to function in well-oiled fashion if we all come together. India is leading the digital payment curve globally by a distance and its only time before we move to complete acceptance.

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