COVID-19 impact: App-based payments double YoY in January-March as people prefer cashless transactions

The coronavirus pandemic has pushed digital transactions and online payments.

Payment transactions made through mobile apps doubled year-on-year (YoY) in the January-March quarter of 2021 as the outbreak of COVID-19 pushed more people towards contactless payments during 2020.

Data released by the Reserve Bank of India (RBI) showed that in January-March 2021, mobile transactions recorded a 96 percent growth in volume to 8.32 billion, while in terms of value they saw an over 104 percent increase against the same quarter of 2020 to Rs 32 lakh crore.

While the growth is largely due to greater adoption of digital means of payments during the Covid pandemic, there are also other factors at play.

“A lot of the mobile app payments are on platforms like Google Pay, BharatPe and Paytm, which are running on the UPI (Unified Payments Interface) platform. UPI is an important factor, but the convenience brought by these platforms has helped,” said Sunil Rongala, Vice President – Strategy, Innovation & Analytics, Worldline India. Another factor that pushed app usage was the incentives offered by the companies, but the factors of convenience and contactless payments far outweigh the impact of incentives, Rongala observed.

An improvement in the quality of app-based transaction services has helped the growth in transactions, said Bharat Panchal, Chief Risk Officer – India, Middle East & Africa, FIS. “System or bank-specific failures have been limited and that has increased people's trust. The other reason is the rise of the 'buy now pay later' (BNPL) option, which has emerged as an alternative to credit cards,” Panchal said.

BNPL is a personalised credit limit delivered by fintech lenders which appears as a payment option while the consumer is shopping online. According to FIS’ estimate, the usage of the BNPL option has shot up 570 percent during 2020.

The assisted mode of making payments has also helped many people who earlier relied only on cash payments to come on to digital platforms. “Players like us, who are working in the assisted payments space, also deliver the service through mobile apps. Between the two waves of Covid, we have seen service volumes rise by 650 percent,” said Yogendra Kashyap, Managing Director and Chief Executive Officer of RapiPay.

Kashyap added that even though payment transactions see a dip in periods of lockdown, they are very quick to recover. “Though there has been a fall in transactions in the current quarter, we expect that by September we should be back at the levels seen in March,” Kashyap said.
Worldline India’s Rongala believes that there is still a good deal of room for the adoption of digital payments to increase. “There are large parts of the country where you won't find a single QR and India is a 90 percent cash economy. That means there's still a lot of potential for digital payments to grow,” Rongala said.

A lot of the growth in digital transactions that will be seen from here on will not just be through UPI-based apps, but also in the form of newer payment options, Rongala added. These would include smart point of sale terminals, which involve chip-based, contactless or magnetic stripe-based transactions. They could also be in the form of tap-on-phone or link-based QRs, which gained traction among local groceries during the lockdown in 2020.