Acclimatizing with the New Normal - How will Digital Payments Adapt to the Financial Interactions in the Post Covid-19 World

Digital payments webinar
Acclimatizing with the New Normal - How will Digital Payments Adapt to the Financial Interactions in the Post Covid-19 World

At Protiviti, we believe that collaboration and exchange of ideas bring about a remarkable value to us and the audience – more so during these challenging times. Hearing new and alternate perspectives can help us contest our own points of view, enhance resilience, and provide us with the much-needed assurance as we make critical decisions.

Over 100 business leaders and payments industry professionals joined us for our panel discussion webinar – “Acclimatizing with the new normal - How will Digital Payments adapt to the financial interactions in the post Covid-19 world”. The aim of the webinar was to have an hour-long conversation with payment industry thought-leaders and understand their views about the current market situation, business impact, strategies and future outlook of the Payments Industry.

Key Takeaways

  • The Market players in the Payments space should evaluate the demand and supply for the need of digital transactions in the current situation and strategize their response accordingly.
  • Reserve Bank of India (RBI) has a vision of getting digital payments deep-rooted in the near future and is ensuring this though various policy reforms. 
  • The industry has an urgent need to ensure that they are prepared for expanding the capacity to match the growing demand for digital payments.
  • For various products in the digital payments bouquet, their real competitor is cash. It is the mind-set of the people to revert to cash based transactions and limited reach of digital products which dampens the growth of digital payments. 
  • Innovative online digital products are the need of the hour. For example, products on lending side or saving instruments, sale of Mutual fund/ Insurance products. However, only the growth in payment transaction volumes may not help increase the profitability.
  • Fraudulent activities have been on the rise in the past few months and to alleviate that, RBI has published guidelines that will go a long way in reinstating the trust of customers on the usage of digital payment channels.

Payment Industry and the Post-Pandemic Financial Interactions

The moderator set the tone for the discussion with a brief introduction around the current situation, how the industry players are adapting themselves to sustain in the market during the crisis, and how the current situation can be a gateway of opportunities for the payment industry.

The broad themes for the discussion included, impact of COVID-19 pandemic on the payment industry, business challenges faced by the industry players, strategies to be adopted by them, digital safety, and overall future outlook of the industry.

Business Impact and Challenges

The panel reflected that the immediate challenge for the organizations is to survive, get back to normalcy, and then make their business profitable and sustainable. Subsequently, post organizations adapt to the new normal, the bigger challenge will be how they can manage to grow in the existing environment. Measures taken immediately from an operational and regulatory stand point will be key. The regulators simplifying policies to ease the business experience and boost digital payments will be pivotal to avoid further disruptions.

The current environment is conducive as compared to post-demonetization times, where merchants and customers are trying various means to transact digitally. However, newer tools to transact effortlessly need to be introduced and put to use.

As there is no clarity on the timelines by when the situation will revert to normalcy, the industry should be prepared for at least next 12 to 24 months. This also presents an opportunity for players to think out of the box while addressing the macro level challenges pertaining to business continuity, surviving and growth during this period.

Digital Safety and Regulatory Environment

With the fraud related incidences increasing in the past couple of months, the regulators are working on the industry to have a system where a database is maintained and shared to counter fraud risks amongst industry players.

The RBI has come up with guidelines for payment aggregators, which includes many aspects from KYC, on boarding, technology requirement, review and monitoring of security at merchant ops, customer grievance management etc. Such measures will make digital payments safe and businesses more sustainable. Investments should be made on generating awareness and educating customers.

The panel put forth the idea of having two simultaneous approaches to enable safety with ease of transactions. First on the prevention side, where initiatives are taken to educate customers and bring awareness. The second on the detection side, where technology should be enhanced, such as the implementation of the risk scoring modules, leveraging customer transaction history, and creating a digital footprint, usage of set up authentication. Both of these would go a long way in gaining customer confidence.

Strategic Intervention and Future Outlook for Payment Industry Players

The present situation requires that people choose contactless payments over actual exchange of cash. It is imperative to bring in innovation across products, processes and pricing. Organizations are bringing supply, logistics and payments together which is working well in cities. However, since people are returning home and are likely to stay there for some time, the question arises, - is there sufficient infrastructure in the rural region?

Organizations need to understand the requirement, design new products, and discover unique pricing models, unlike the legacy ones, to ensure that all stakeholders are benefited. A hybrid payment solution can be brought in by the industry players.

Organizations will also need to practise self-regulation. Regulators, service providers and banks should come together to identify and address loopholes in the system.

Post the current situation, there can be a possibility that people may want to minimize contact with physical currency and embrace more digital payment options. RBI too has a vision of getting digital payments deep rooted in the near future. The industry will need to ensure that they are prepared for expanding the capacity and match the possible upsurge in demand.

Parting Thoughts

The panelists highlighted that payments is a large industry and has more room for innovation in products, processes and pricing. Currently, the various products offered across payment platforms perform varied roles. However, due to the competitive environment, the ones delivering better service are faring better.

Existing payment ecosystems have many reasons for people to not transact with digital products, and hence the regulators need to focus on such existing concerns first. Only after that, they can bring around a sense of digital safety in the customers and help boost the digital payments.

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