FinTechs, banks play a vital role in engaging customers amidst the COVID-19 spread

A: At this stage it is exceedingly difficult to analyse the specific fallout of COVID-19 as the situation is unfolding every day. Broadly, however, in the wake of the COVID- 19 uncertainty, consumers would curtail discretionary spend. This would impact overall volumes of payments. But as consumers self-distance to stem the pandemic, an increasing proportion of payments would shift to digital channels.

The global impact of COVID-19 would also lead banks to rethink how they interface with consumers and fast track digital innovation efforts. Banks are looking to potentially do more with technology, not less. Several banks would now look to modernize payments infrastructure by working with FinTechs. Traditional banks may not have all the capabilities to support a new payments order and must collaborate with FinTechs that are flexible and more capable of satisfying digital needs of the end customer effectively and quickly. SaaS-based models and the cloud will play a vital role as banks work to ensure services are available and accessible by all consumers.

Financial technology companies with strong underlying fundamentals that can help business speed the transition to digital and offer innovative pay-as-you-grow business models will be able to successfully navigate the current crisis. At FSS, for instance, we are working closely with several banks and sharing our pay-tech expertise to keep the “lights” on and ensure smooth functioning of payment rails.

Q: Which segments will see an increase in digital payments, and which are the sectors to take a major hit?

A: On the positive side, digital payments could transition from a high-value, low-volume business to a low-value, high-volume business, with customers adopting digital modes for small-ticket transactions.

As customers self-quarantine, e-commerce traffic will register growth. We foresee a significant uptick in doorstep deliveries of food, groceries and pharmacy. Large retail chains will invest in their own online stores to take advantage of the trend. Small local and “mom and pop’’ stores will resort to accepting phone orders and electronic payments. This could be a real opportunity to address India’s long tail by aggregating small and medium merchants as well as smaller corporates and bringing them into the digital fold. Online bill payments could also show a strong growth trajectory, as consumers increasingly move away from manual touch points.

Q: How are FinTech start-ups driving adoption of digital payments in India?

A: India’s digital economic surge is well under way, with the digital payments market in India expected to become a USD 1T market by 2023. The government push and a favourable regulatory environment has made India the third largest Fintech Hub globally. In India, the FinTech start-up ecosystem is experiencing rapid growth in collaboration with banks, supported by a large market base in a landscape that is driven by innovation.

According to Medici, mobile, digital wallets, gateways, POS, mobile POS sub-segments account for over 50 percent of the payment start-ups in India. In the last few years, there have also been several exciting innovations in this space, such as UPI, Aadhaar for eKYC, BharatQR for QR-based payments, biometric payments (AEPS), e-wallets and sound-wave-based payments for rural engagements, and last-mile connectivity. These innovations highlight the fact that India is carving out a niche for itself in low-cost, large-value, FinTech-driven innovation that is focused on urban and rural segments alike.