Unlock BFSI 2.0: Covid has accelerated digital payment adoption by 5-10 yrs

The Covid-19 pandemic has done more to digitising payments in India than what demonetisation achieved, and the digital future is here to stay, said executives of some of India's top fintech firms while speaking at a webinar organised by Business Standard on Friday.

What otherwise would have taken 5-10 years to achieve for India’s digital payments ecosystem, the pandemic has done in just five months, said the panelists at Unlock BFSI 2.0, the second of a series of webinars on banking, financial services and insurance (BFSI), moderated by Consulting Editor Tamal Bandopadhyay.

The panelists concurred that the pandemic had presented them with huge opportunities, but there were challenges too to overcome.

T R Ramachandran, group country manager India & South Asia of Visa, said: “Each of us is excited about the decadal opportunity for digitisation.”

Manish Patel, founder & CEO, Mswipe Technologies, said: “There are challenges in payment industry, and some of those need to be addressed.”

Apart from accelerating its evolution in India, Sameer Nigam, CEO, PhonePe, said: “Covid has been very helpful in customer acquisition, even more than demonetisation.”

WhatsApp, which has a huge customer base in India, is looking to foray into its digital payments space for a long time now, but it has been delayed. However, WhatsApp Pay is now all ready to launch its service after complying with the data localisation parameters prescribed the regulator.

On the competition ahead, Sajith Sivanandan, managing director and business head, Google Pay, said: “There is no more competitive sector (than payments) and no more competitive country than India. When more players enter into the ecosystem, then automatically there is growth.”

But, while there will be growth, it may not be a smooth sailing for new players.

“I would like to see WhatsApp enter sooner than later. I am not very bullish on people opening up their purses for every kind of applications they use. I don't think it (WhatsApp's entry) is a cakewalk, I don't think it is threatening,” said Nigam.

While there are so many payment services providers, life is still difficult for the merchants. But change is imminent, both for customers and the ecosystem.

Patel said, “The merchant discount rates (MDR) on debit card are extremely low, but in credit card, MDR is high. That’s why the merchant doesn’t want to accept credit cards. We have a product bank box where the merchants don’t have to pay any kind of fee. This industry is going to continue to change.”

The urban population and centres have made a smooth transition to digital payments, but Bharat is still behind. Patel said: “As credit on UPI becomes operational, that is when we will see penetration in rural landscape.”

"When they are talking about tapping Bharat, offering sachet size products is important and has started happening in insurance and payments," Nigam said.

But, the industry will have to take a few more steps to increase awareness and confidence.

Rajesh Mirjankar, MD & CEO, Infrasoft Technologies, said: “Digital literacy has to start with educating customers on what are the pitfalls of not following right security mechanism.”

Advocating the need for democratising credit, where all sections of the society have equal access and not a select few, Ramachandran said the Open Credit Enablement Network (OCEN) democratises the whole consumer lending process as there is no information arbitrage like a large bank has. Plenty of fintechs will hitch their wagon to OCEN in the next 36 months, he added.

At a time when smartphones have become the new payment mode, plastic cards (debit & credit cards) may lose their relevance in coming years. Amid this, Visa said it was no longer just a card network. 

“We are punting on technology of 'tokenisation'. We are aiming to tokenise credentials and put it in a mobile phone. There are going to be 20 billion Internet of Things (IoT) devices and think of all these becoming payment instruments speaking to each other. That's the vision of a network we are planning for,” Ramachandran of Visa added.

While banks today have embraced digitisation wholeheartedly, even the ones who seemed cagey initially, panelists unanimously agreed it was time the country gave space to a completely digital bank.

“The current licences of small finance banks and payments banks do not make much sense to most fintech players,” said Nikhil Kamath, co-founder & CIO, Zerodha.

Some, though, cautioned that while it was very easy to give money digitally in India, receiving money (digitally) was a whole new kettle of fish.

During the pandemic, the role of technology was apparent in the stock trading business. "Access to stock market is very very under penetrated in India. More and more people are now are using web platform for stock trading," Kamath said.