Trust plays a major role in the future of digital payments. Customers look for credible platforms and brands for a secure and seamless payments experience. For any fintech company, it is essential to address these needs, while building a business model based on innovation, and ensuring regular fine-tuning of infrastructure.
For consumers to have faith in the system, in an era when data breaches are frequent, it is imperative to create infrastructure that protects customer data and ensures the safety of their money. This helps build a positive atmosphere for digital payments, gain trust and develop long-lasting consumer relationships.
In this article, we will talk about the measures that India’s regulators have taken, as well as the measures that online payment gateways and merchants can take to increase consumer confidence in digital transactions.
Positive impact of policy initiatives:
The future of digital payments in India looks optimistic and scalable, backed by the robust steps taken by the Indian government and regulators. The Reserve Bank of India (RBI) has introduced measures to make digital flow of cash easier and less cumbersome, making India one of the most rapidly growing digital economies in the world.
In 2019, the RBI announced the removal of charges on NEFT, introduced new systems such as FASTags which could be utilized to pay parking fees and fuel on highways, launched UPI 2.0, and removed Merchant Discount Rates (MDR) on digital payments, among others.
Policy framework changes, government initiatives, and industry associations indicate that India will have an improved digital infrastructure and become the fastest economy to adopt digital payments. According to the Global FinTech Adoption Index 2019, India has an 87 percent fintech adoption rate. The wide acceptance of digital payments has opened several avenues for businesses to explore online payment services and solutions.
The introduction of Unified Payments Interface (UPI) has accelerated the adoption of digital payments in India. According to the RBI, UPI systems handled 874 crore transactions with year on year growth of 263 percent. One of the main advantages of UPI is that the unique identification created protects user credentials such as bank account or card details.
Reducing the risk of online transaction failure:
It is important to note that though technology exists to make our lives easier and efficient, it needs regular monitoring and upgrading. Banking systems are not infallible, and when these online transactions fail, faith in digital payments takes a hit.
A way that cutting edge payment gateway platforms are mitigating this is to partner with multiple banks help reduce the risk of failure in online transactions. In this way, if the server or processes of one bank’s server fails, there is a back-up. By tying up with multiple banks, payment gateways can ensure that online transactions can go through with minimum hassles and failures. Payment gateways can also reduce failures by:
Queueing – Banks are limited to a certain number of transactions per second (TPS). When there are higher number of requests, simply queueing and restricting the transactions to what the bank server can handle will reduce failure rates.
Auto-retry – When a transaction fails, it is ideal to retry the transaction a specific number of times. This data can then be used to understand the number of times the transaction should be retried and algorithms can then be written to optimize success.
Rerouting – It is not uncommon for a certain channel (for e.g., IMPS) of a bank to fail on any given day. In such cases, smart algorithms can help reroute the transaction through another mode – for instance, NEFT. If the systems are integrated with multiple banks for API banking, this transaction can easily be re-routed through another bank as well.
Making refunds faster for customers and merchants
In any business, receiving refunds on time is critical for customers, irrespective of how much money is at stake. Consumers tend to lose confidence in a retailer if their refunds take a long time to be credited. It is important to understand that there are three parties involved in any refund process - the customer making the transaction, the payment gateway and the merchant.
Refund processing is complex and form a significant part of online payment activities. Merchants that are able to offer their customers instant refunds, both on online and cash on delivery (COD) payments can help increase both, the loyalty of their customer as well as their confidence in digital payments as a whole.
To build increased consumer confidence in digital payments, online transaction failures have to be reduced to a minimum. According to a recent study by YouGov and ACI Worldwide, it was found that failed transactions amounted up to 36 percent, problems in processing refunds were 32 percent and frauds were 29 percent.
These three categories comprise the main source of problems with online transactions. Demystifying back-end processes of digital payments is necessary for customers to understand and trust digital payment systems. The financial technology market is expected to grow multi-folds in the near future, backed by strong back-end infrastructure and industry first solutions to tackle real-world problems in the payments segment.
The author is Co-founder of Cashfree a payment and banking technology company, based out of Bangalore.