The digital payment ecosystem in India has grown over the years with the introduction of payment infrastructure solutions such as IMPS, BHIM UPI, NACH, mobile wallets, and much more. Dhananjaya Tambe, Deputy Managing Director and CIO, State Bank of India, emphasised on the importance of consumer convenience for the success of digital payment solutions at the Pay-iT Conclave 2020 conference by TechCircle and Hewlett Packard Enterprise. He also shared key trends and data insights that can enable FinTech industry leaders to shape their business strategy with the new opportunities that have surfaced in recent times.
The shift in consumer behaviour after demonetisation
Earlier, the Indian consumers’ appetite for cash-based payments was a major challenge for the successful penetration of digital payment solutions. Digitisation initiatives by the government have been welcomed by fintechs, banks, and other industry bodies who aimed for a transaction shift among the Indian consumers. One of the high impact digitisation initiatives introduced by the government is demonetisation. Demonetisation shook the payments space in 2016. As per recent statistics discussed by Dhananjaya Tambe, there has been a phenomenal shift in the behaviour of Indian consumers post demonetisation. After an initial dip, debit card withdrawals by consumers increased almost by INR 1 lakh in the banking sector. Acceptance infrastructure bloomed with the growth of digital payment solutions by providers like Pine Labs. There were changes in the Indian consumer payments space.
After demonetisation, people realised the benefits of their debit card beyond cash withdrawals through ATMs. Here are a few critical insights from Dhananjaya Tambe’s presentation on the payments in the Indian banking sector:
- In 2018 and 2019, Diwali on Diwali, people have withdrawn the same amount of cash.
- Indians spent 31% more on e-commerce in 2019 Diwali than in 2018 Diwali.
- There has been a steady number of transactions and a steady increase in the transaction amount.
- Instead of using cash, consumers have used cards for POS transactions.
Inside the retail internet banking space
As per the latest statistics, the number of users has increased in the retail banking space. Also, the transaction amount is increasing, and the number of transactions is dipping. For small-ticket transactions, people are shifting to other channels, to mobile banking from internet banking. UPI has been a major influencer in the transaction shift. The UPI platform brought the convenience sought by Indian consumers and the transactions got a boost.
According to Dhananjaya Tambe, monetary incentives and convenience for consumers has led to a phenomenal explosion in transactions. The number of transactions has increased by 10 times, and the transaction amount has increased by 8 times from 2018 to 2019.
When it comes to corporate internet banking, there has been an increase in the transaction amount due to GST and other charges. But the number of transactions hasn’t increased as much. Retail space is getting crowded with digital solutions. There are untapped opportunities for FinTech entrepreneurs to collaborate with banks and corporates for developing convenience-based solutions for the corporate banking sector.
Need for convenience banking through digital payment solutions
This year, fintech entrepreneurs have to think of ways to make mobile-based solutions more convenient for tasting success. More than the transaction cost, convenience matters for consumers of digital payment solutions. As per the stats, an average of 1 crore transactions occurs each day on the UPI channel. UPI succeeded because of the convenience it offers to users. Again, Aadhaar Pay is secure and very convenient but it requires a biometric reader that adds to the cost of the payment accepting company.
The bottom line is, retail is growing more than corporate banking in the digital payments ecosystem. Convenient and faster payment solutions are likely to succeed in today’s consumer-centric payments market.
Senior leadership from Hewlett Packard Enterprise, Visa, NPCI, and other notable organisations discussed the latest global payment industry trends at TechCircle Pay-iT Conclave 2020 that was held recently in Mumbai. Click here to learn more about the event.
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