Even though most people are unaware of the nomenclature ‘contactless payments’, it has been very much present around us. It is as simple as hailing a cab using a cab-aggregator. You take the ride and the payment is taken care of digitally. Now, we are just deepening the penetration of these solutions.
Banking & Payments are considered to be the livewire of any economy. Financial institutions have constantly been challenged to adapt to the changing business environment and the pandemic has further accelerated it. One of the most immediate challenges that banks faced after the imposition of the lockdown was to equip customers and employees with digital tools & interfaces. Many customers had to make digital transactions for the very first time and educating them about the same was of paramount importance. Due to the ambiguity around the virus and restrictions in movements in its initial days of spread, customers were highly apprehensive of withdrawing cash from ATMs. To tackle this, various banks introduced several digital initiatives and improvised the existing processes. Initiatives such as virtual banking (KYC, investments, loans etc.) and contactless cash withdrawals from ATMs are expected to become the new normal in near future.
Retail stores including Kirana stores and other mom-and-pop shops are also being seen to swiftly embrace digital payments to provide added convenience and safe transactions amidst the pandemic. Transactions on multi-mode ONGO POS terminals which support payment modes like tap-and-pay and QR based transactions have gained popularity.
A survey conducted by India Transact Services Limited, a merchant payments solution company, found that 57 per cent of its respondents used digital payments 5-6 times a week while 21 percent of them claimed to use it thrice. Additionally, according to a report by KPMG India has more than 45 mobile wallet providers and around 50 UPI-based wallet providers. Owing to ease of access and convenience, UPI payments reached an all-time high. According to the latest data released by the National Payments Corporation of India (NPCI), UPI recorded 1.49 billion transactions worth 2.60 trillion in July.
The introduction of UPI Autopay is expected to further this growth and bring more people under the ambit of Digital India.
These statistics and projections have led the RBI to designate a significant amount of funding for the infrastructural development of digital payment acceptance in areas that are not truly digitised. “5 million physical PoS or 20 million digital PoS will be upscaled many a time and this is really going to change how people look at digital payments”, said P Vasudevan – CGM – Department of Payment and Settlement Systems at RBI, speaking on the sidelines the virtual Global Fintech Fest.
Near Field Communication (NFC) the premise for contactless payments, will see a surge as tap-and-pay gains popularity. Recently, Mastercard and the Payment Council of India urged RBI to relax the norms on NFC to increase the usage of the same. With this move, contactless payments using NFC i.e. contactless cards will gain momentum as it would reduce physical contact completely.
Another popular mode that has aided social distancing and contactless payments is the QR code. These tiny squares have enabled various businesses to switch to digital models with utmost ease. In fact, a recent RBI committee is reportedly in talks to completely phase out closed-loop QR codes and welcome interoperable codes to bring in more people under the contactless payment ecosystem. The surge in UPI can also be traced back to the ease and convenience that QR codes offer. They offer more transparency, convenience and are safer & quicker than most modes of payments. Hence, it comes as no surprise that Unified Payments Interface (UPI) is currently catering to over 250 Mn transactions monthly through QR codes.
Many restaurants have now begun to use QR codes to scan menus, place orders and even pay the bills. Another sector that has embraced QR-based contactless payment is transit. In India, Metro stations like Kochi Metro were already accepting QR based tickets and now even local trains & buses in cities like Mumbai have begun accepting these contactless entry[ii] & payment options.
Three entities Indian Railway Catering and Tourism Corporation (IRCTC), State Bank of India (SBI) and National Payments Corporation of India (NPCI) have introduced the IRCTC SBI RuPay Card. It is equipped with Near Field Communication technology and more convenient, faster and secure to accept payments online and at PoS using Tap and Pay. This solution caters to a very large audience that travels across the length and breadth of the country frequently.
Having said that, with the surge in digital transactions, there is a need to regulate and mitigate the risks that come along with these platforms. Concepts like tokenisation can help us make these transactions more secure for all the stakeholders in the value-chain. Tokenised cards may bring the next wave of contactless payments. Here, the details of the user remain with the acquirer bank only, making the transaction card & bank details completely confidential and secure.
Social distancing is expected to be the ‘new normal’. Owing to this, various ‘experiences’ will also become contactless in a truly end-to-end way. For instance, many retail sports giants have already started encouraging contactless shopping experiences. We may soon see mobile-based queue management, contactless checkouts service and even electronic shelf labels etc. at retail stores. Digital tokens, pre-booked slots and self-servicing shops will gain momentum.