Following two years of pandemic-propelled growth, usage of digital payments will continue to expand in 2022 as the payment ecosystem matures and new capabilities are tested and refined through daily use.

According to the Reserve Bank of India (RBI) the number of point-of-sale (POS) devices in India has increased from 4.6 MN to 5.5 MN in the past year, each one a building block in the infrastructure needed to make digital payments possible. Multiple regulatory actions are promoting the usage of digital payments amongst consumers and merchants – including the establishment of the Payment Infrastructure Development Fund (PIDF), which helps subsidize such POS infrastructure in tier 3 cities and beyond, increasing the limit for contactless payments, and allowing card tokenisation.

In a country with one of the highest fintech adoption globally and concentrated efforts to reduce dependency on cash, the following trends will further add to this seismic shift in the adoption of cashless payments in India.

  •    Payment cards being used for a broader range of payments

The use of cards for payments is continuing to gain significant traction. With the increase in the limit for contactless transactions, and credit cards offering easy and secure access to credit, there is more opportunity for people to use their cards for everyday payments. And this is further expected to accelerate in cities beyond metros as the result of regulatory initiatives including PIDF and offline payments, which is intended to expand the use of digital payments in areas with poor internet connectivity.

  • Point of sale technology emerging as an operating system

During the pandemic, consumer inclination towards digital payments propelled next door mom-and-pop stores to start accepting cashless payments. Benefits surrounding the digitisation of businesses are substantial, from accepting payments through managing their entire store and other tax-related activities, businesses now can run their operations through the POS terminal and software and open allied revenue streams. Additionally, with a lack of easy access to formal credit, terminalisation enables them to avail LACR (Loan Against Card Receivables), thereby helping them to run their business smoothly.

  • Offline businesses moving online

The intermittent lockdowns increased consumers’ dependency on online commerce, with the sector reporting impressive growth between 2020 and 2021 and Tier 2 and 3 cities transacting more than ever. These factors, coupled with the government incentive and push for increasing acceptance of digital payments, will compel more offline businesses to migrate online. Easy and affordable technology integration in today's world has made it possible for businesses to create an online store, host their catalogues, and tie up with new-age delivery providers.

To make online payments more safe and secure, the RBI guideline for enhanced card security through the use of encrypted tokens to carry out transactions is a positive step in enhancing the safety and security of online payments.

  • Easy instalments providing aided convenience for consumers and merchants

The ease and convenience of converting a transaction to a suitable instalment plan right on the terminal or while purchasing online has increased the inclination of consumers towards such offerings. Credit and debit card instalment plans give consumers the flexibility to break down their spending into instalments, while helping them build their credit score, provided repayments are made on time. Instalment payments give merchants an edge over others, thereby helping attract more consumers. With the entire credit process being managed by banks, fintech and payment processors, merchants can now focus on enhancing the consumer experience.

  • Open APIs continuing to fuel India’s technology revolution

While technology focused organisations have a solution catering to different requirements of consumers or merchants, the movement of monies between traditional financial institutions, fintech and other stakeholders won;t be possible without seamless integration of APIs. The open use of technology fuelled their adoption, and we expect the same to continue in 2022. Utilising technology ethically will be critical too as we move ahead.

As we enter 2022, we continue to witness a tectonic shift in how money moves. With consumers now getting accustomed to things happening instantly, we see their preferences shift from mere basic transactional interactions to enriching transactional experiences. Amidst such a scenario, keeping security at the centre of everything, the traditional financial institutions have realised the importance of cultivating relationships and redefining their services or offerings based on consumer needs. And this is where the technology focused-financial institution collaboration will become imperative to deliver the next-gen experience in digital payments. With technology and innovation at the core, financial institutions will be empowered to deliver tailored services and secured products and boost financial inclusion in the country, thereby leaving a positive impact on the economy.



Views expressed above are the author’s own.



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