Jul 06 - 2020
The global pandemic has triggered a significant shift in social behaviour. Hygiene, especially, has taken precedence across all walks of life. Masks, home keys, and sanitisers are on everyone’s checklist before they head outside. But, what is going inside people’s wallet these days?
A key behavioural shift in the new normal has been in payments. Consumers are adopting digital or contactless payment methods that don’t require physical contact with external surfaces. Wallets that once were filled with cash are making place for contactless cards.
The advent of the Unified Payments Interface (UPI) has been a major contributor to higher adoption of contactless payments in the country. In 2019, UPI recorded 10.8 million transactions, outdoing both debit and credit cards. The dominance of UPI in the payment landscape doesn’t take away from the reliance of cards as a payment mode.
India currently has the 2nd highest debit cards issues in the world, with over 816 million and a further 56 million credit cards. Contactless cards bring in 15% of the transaction volume for cards but constitute only 25% of the cards in circulation. The gulf between traditional PIN/CHIP-based cards and contactless cards is quite significant.
But, both regulators and merchants are taking notice to the shift in consumer behaviour and the hygiene-centric value proposition of contactless cards.
Industry figures show that 80% of merchants haven’t digitised, yet India currently has over 5 million merchants accepting contactless payments. The pandemic and increasing customer demand have stirred things up, pushing the non-digitised merchants to go the digital way. Contactless payments play well to their needs as it gives their customers a hygienic and more convenient transaction experience.
With a ‘cash is king but digital is divine’ motto, the RBI has been introducing several measures and guidelines that push and facilitate digital payments.
In their latest move, the regulator gave a green light for all transactions going contactless at retail stores and shopping centres. What does this mean for banks and card-issuers? It implies that contactless cards can be used by consumers to make purchases of over INR 2,000.
For the longest time, contactless cards have been promoted as a convenient and faster mode of payment. These value propositions have been the significant messages used to drive adoption. But, with the new normal setting in, banks have a unique selling point with contactless payment methods.
Banks can circumvent the need for PIN entry at POS machines by partnering with ACS platforms like Cipher.The platform comes with features like SuperPIN; a dynamic PIN that changes every 2 minutes and is valid only once per transaction. Customers can easily access this PIN on their bank app and share it with the merchant without worrying about PIN security or physical contact with the POS machine.
The need and demand for contactless payments has never been higher. Banks have looked at card-reissuance, new customer accounts, and customer requests as trigger points for issuing contactless cards. But, with steep growth projections for the next few months, banks will need to relook at their reissuance strategy to cater the demand.
There still exists a large section of card users who have never used or heard of the contactless/tap-and-pay payment modes. Efforts to educate customers on the merits should be ongoing with the hygiene-centric value proposition coming in again to gain customer attention and drive adoption. Security of contactless cards is another area of concern for customers. Driving home the mechanisms and measures in place to protect contactless payments can help in truncating the adoption curve.
The new normal has only accelerated a rising trend in contactless payments. With growth projections for the next 3-4 years expected to be seen in the next 3-4 months or lesser, banks will have to act quickly to meet the demands of an evolving market. Empowering customers with the choice of payment modes (UPI, contactless cards, digital wallets, etc.) that make the transaction experience safe and convenient will ultimately help banks stand out from their competition.
