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Are digital transactions reaching a plateau?

LiveMint logoLiveMint 31-07-2017 Shaikh Zoaib Saleem

The government recently said in the parliament that the volume of digital transactions has declined. We spoke to industry experts about the challenges for growth of digital transactions in India

Deepak Sharma, chief digital officer, Kotak Mahindra Bank

When we look at our own data, March has a higher peak especially as a lot of people pay taxes and other payments using net-banking. If I look at January as the base, which was the peak impact of demonetisation, we see our transactions on net-banking and mobile banking still growing at a healthy rate. While I know there are other observations at an industry level, it also depends on how different banks have been able to sustain digital transactions by bringing in more features. In our case, we have seen our mobile transaction value grow by over 22%, even from the peak of demonetisation in January. Net banking growth is not as fast as mobile banking, it is roughly around 12%. Volume wise, certain categories like mobile recharges that have come down. When you look at the slowdown at a broader level, there was an urgency initially for many consumers to adopt digital transactions. The habit formation takes longer than just the initial period. Our learning has been that the learning curve for a digital customer is anywhere between 18-24 months.

Growing digital transactions further will take more communication on how convenient it could be. For instance, you can block and unblock a debit card from an app, and even change its PIN. These may not count as transactions, but drive engagement. Convenience, in the form of having your bank available 24x7 is the biggest incentive for customers.

B Amrish Rau, CEO, PayU India

One of the positive effects of demonetisation has been the promotion of digital and cashless economy. However, to accelerate it, touch points need to be created for transactions to take place seamlessly. The groundwork for digitisation also involves wider acceptance of digital payments both in the offline and in the online world.

Infrastructure gap has been holding back the growth of digital payments which is set to change now. Various establishments and businesses have already started building the infrastructure to accept digital payments. Smaller businesses in rural and semi-urban markets have also recognized the value proposition of cashless payments, and many of them have been enquiring about options to integrate digital payments.

On the consumer side, while the e-wallets haven’t been a mainstream success, some early trends indicate that UPI is going to be successful.

Moreover, fintech players in the country are gearing up to artificial intelligence-based technology services, which can handle incredible volumes. The next disruption that might radically change how people transact is expected to be in the consumer lending space. At present, the credit model in India is broken but once accessible, it will find mass acceptance. Hence we believe that credit is well positioned in India to be the next game-changer in the digital payments space.

Upasana Taku, co-founder, MobiKwik

With favourable demographics, booming e-commerce, availability of affordable smartphones and government initiatives like Digital India, the country is showing signs of transitioning to a digital economy. Cashless payments currently account for 15% of $1.5 trillion worth of consumer spending. Over the next 2 years, these can rise to 60% to 70%. The fin-tech industry has redefined the way businesses and consumers carry out routine transactions. Wider adoption of these new innovations can help create new revenue channels and reduce overheads of companies, thus positively impacting their financial bottom lines.

The Aadhaar programme is expected to assist the financially excluded segments and remove financial untouchability.

New offerings from mobile wallet companies are poised to change the way India transacts. Secure login, ease of transaction and ease of access are structurally embedded into their platform architecture.

I am confident that m-wallets will add immense value to Indian retailers and users—and benefit our economy. Challenges, however, remain. We need to spread financial literacy. A robust digital infrastructure will encourage more merchants and consumers to transact on mobile platforms.

Broadband connectivity needs to spread across all cities, towns and even small villages.

A.P. Hota, MD and CEO, National Payments Corporation of India

Similar to the JAM trinity of JanDhan RuPay cards, Aadhaar and mobile, a new frontier has now emerged in the micro-payments space.

It is called BTT, which stands for bills, transit and toll.

In the target of 25 billion digital payment transactions by the Government of India, the thrust has been given on digitization of bill payments, transit payments like in-city buses, local train travel and toll payments—which are collected across highways and toll roads in the country.

The National Payments Corporation of India is ready with products on all the three segments:

1. Bharat Bill Payment Service for bills, 2. National Common Mobility Card for transit and 3. National Electronic Toll Collection for tolls.

This trinity of BTT will increase the pace of digital payments in India.

Live projects like Bharat Bill Payment Service and the application of RuPay contactless payment cards at Kochi Metro, Bangalore Metropolitan Transport Corporation and the Janmitra RuPay at Ahmedabad are the avant garde of introducing new ways of doing regular transactions digitally for the daily users.

We also hope for support from all the banks that partner with us, as well as the regional rural banks and co-operative banks; in building awareness and reaching every corner of the country with the vision of having a truly digital economy.

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