QUESTIO-1. Talk us through Digital payments? What do they mean and what importance do they have for India?

Before we talk about digital payments, lets talks about digital and what that means and relevance in today’s time. Digital is anything non physical and does not require any contact to be established. If we look, this applies across multiple verticals whether this is shopping, food, leisure or travel. Each and everyone of these verticals can be enabled digitally and whilst the end use or consumption remains physical, digital is the enabler in all these cases. One thing that is common across all of them is the payment. Anything you wish to consume needs to be settled digital payment allows you to do that. Digital payment is anything except cash and keeping India in context, this could mean your bank account, debit or credit card, mobile wallets that are being offered by various financial and non financial segment. According to a recent study by AssochamPwC:-


• Digital payments in India will more than double to $135.2 billion in 2023 from $64.8 billion this year,
• India is expected to clock the fastest growth in digital payments’ transaction value between 2019 and 2023 with a compounded annual growth of 20.2%,

If we look at situation today which is covid era, due to lockdown people were not able to leave their houses to buy essentials and digital payments gave them the option of transacting from the safety of their home and even now when lockdown is being lifted, people are still reluctant to move out. They have also realized the convenience that digital payments offer. The covid pandemic and the way of the life now will be the new norm and digital payments will enable a safe, convenient and seamless experience for the consumers.



QUESTIO-2. As an extension to the earlier question, when we talk about digital payments, a term commonly referenced is digital or mobile wallets. Can you explain what they are and how they tie into digital payments?

Before we talk about digital payments, lets talks about digital and what that means and relevance in today’s time. Digital is anything non physical and does not require any contact to be established. If we look, this applies across multiple verticals whether this is shopping, food, leisure or travel. Each and everyone of these verticals can be enabled digitally and whilst the end use or consumption remains physical, digital is the enabler in all these cases. One thing that is common across all of them is the payment. Anything you wish to consume needs to be settled digital payment allows you to do that. Digital payment is anything except cash and keeping India in context, this could mean your bank account, debit or credit card, mobile wallets that are being offered by various financial and non financial segment. According to a recent study by AssochamPwC:-


• Digital payments in India will more than double to $135.2 billion in 2023 from $64.8 billion this year,
• India is expected to clock the fastest growth in digital payments’ transaction value between 2019 and 2023 with a compounded annual growth of 20.2%,


QUESTIO-3. What in your opinion will drive digital payments in this market? I mean, cash is a popular choice of payments and is easy and convenient, so why the need for either the customers to pay digitally or for the sellers to accept this other than cash?

No doubt cash is the most popular means of method in India and has been for many years but a large part of the problem has been existence of parallel economy in India which has encouraged use of cash. The government hasand continues to take bold steps in curbing this parallel economy earlier through demonetization and now through promoting digital payments in India. Introduction of Rupay, UPI, PMJDY accounts are laudable efforts and a stepping stone in driving the digital agenda. We now also see curbs being put in place for Chinese apps and focus on promoting india apps and overarching intent of atmnirbharindia. Whilst there is still a lot to be achieved, the steps taken have been progressive and encouraging and we have started to see results. As per RBI data, whilst cash still constitutes around 70% of purchase but digital payments are growing at a rate of 60%. I think it is important to remember that digital payments offer convenience, transparency and accountability to both buyers and sellers and contribute in the overall economic growth of the country. One of the areas though that still needs to be addressed is pricing parity especially for the sellers who are accepting this and this is often confused with the misconception that cash is free. Cash does carry cost which includes handling and then depositing into the bank account hence resulting in ineffective use of time. Once the pricing for digital payments is aligned and commercially attractive to the sellers then we ar








QUESTIO-4. . We keep hearing that digital payments are growing at a very fast rate. Could you help us understand factors that are contributing to this? You alluded to this in your comments earlier and if you can elaborate on the key reasons please.

I would say there are six key factors that are driving this and some I have been alluding in my earlier conversations. These are:-


Government – The current govt is genuinely invested in driving the digital agenda and we have seen number of interventions over the course of last five years – favourable price economics, expanding payment options such as QR code& IMPS,granting payment banking licences to reach last mile connectivity and making sure that banking is available to anyone and everyone. Lastly we have seen home grown payment network getting accelerated and the vision of being atmnirbhar.


Ecommerce - As the fastest growing ecommerce market in the world—India had over 50 million online shoppers in 2018. This opportunity has largely been in tier 1 and tier 2 cities, where a majority of the 500-600 million middle income Indians reside. We are now seeing smaller towns also getting comfortable with the idea of digital purchases and payments and whilst this is somewhat instigated by demonetisation and covid but given the experience is largely seamless, there is inclination in keep using this.


Millennials- The third will be the millennials which is people below 30 years of age. They look for convenience, flexibility, are challenging the norms and front runners in embracing newer experiences.


Technology- The fourth factor will be technology where we not only have banks but number of private players bringing in the solution. Some are going solo and some in partnership with government and banks. There is intense competition out there and the differentiator is ease of using these solutions and customer experience.


Infrastructure-This includes POS terminals and payment gateways which facilitate online payments. The number of POS terminals has grown at a CAGR of 29.0% from fiscal 2015 to reach 3.7 million terminals in FY19.


Digital- wallets – Lastly and this is what we spoke about earlier that there are plethora of wallets in the market and whilst some have consolidated, the prominent ones will continue to stay namely Paytm, Phone Pe, Google Pay. There are partnerships being stitched between them, banks and payment schemes which means that customer using the wallet will not only get a seamless experience but an enriching one. Banks and Fintech companies offer attractive cash-back offers to credit card consumers. Credit card consumers can enjoy rewards from both banks and Fintech companies.


QUESTIO-5. Can such payments also be made outside India or is this very much meant for India. We keep hearing the term cross border payments and please provide your perspective on this.

Absolutely and if you look at cross border flows, these have mostly been digital. These used to business purchases with importers buying goods from outside countries and settling via bank and other means. Now we also see this getting very prominent in travel and e-commerce verticals and the factors driving this is India’s strong economic growth, rise in disposable income and growing middle class. According to an m-commerce report by Paypal, one in 2 mobile shoppersare spending for cross border purchases. Around half of the shopping is done on US-based eCommerce sites. The rest is between the UK and China. Then we also have Amazon and Walmart-owned Flipkart bringing overseas brands to consumers. The reason why this has also been successful is the price point and the quality. These sellers have been selling at a lower prices on many consumer goods. For price-conscious Indian buyers, that’s been a major factor.



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