Out with the old, in with the new, they say. How true! In a matter of just three months, having the coronavirus on the prowl changed consumers’ attitude towards safety, spending, and everything in between. The pandemic has inadvertently pushed more businesses and people to accept digital payments. Case in point, fintech firms in India have been seeing the number of new users and merchants surge on their platforms over the past couple of months.

For instance, the new user acquisition on payments app PhonePe has grown by 50 per cent since March, said Karthik Raghupathy, V-P, Strategy & Business Development, PhonePe. Instamojo, a payment gateway, has been seeing a 25 per cent increase in the number of merchants on its platform since the lockdown, with about 1,500 new sign-ups every day, noted co-founder Akash Gehani. BharatPe, a QR code-based payment app for offline retailers and businesses, saw 25 per cent more active merchants in May compared to February, said co-founder and CEO Ashneer Grover.

After the slump in April, transaction volumes also began to pick up in May. According to data from the National Payments Corporation of India (NPCI), the volume of Unified Payments Interface (UPI) transactions rose to 1,234.5 million in May, a 23.5 per cent increase from April’s levels. The amount transacted also climbed to ₹2,18,391.60 crore, the highest on the platform after February 2020. The number of banks live on UPI stood at 155 in May, the highest ever so far.

Data also showed that the number of Immediate Payment Service (IMPS) transactions rose to 166.68 million in May from 122.47 million in April. The transaction count on Bharat Bill Pay also surged to 16.54 million last month, up 29.5 per cent from April’s levels.

Fintech post Covid

A recent survey by McKinsey and Company stated that consumers in India have increasingly adopted digital and low-touch activities such as online streaming and digital payments while at home, many of which they intend to continue post-Covid. It also revealed that Indian consumers expect to shop more online across various categories.

PhonePe’s Raghupathy said that users are also increasingly becoming comfortable with buying financial services and products such as insurance, gold and mutual funds completely digitally, without the need for in-person interaction with sales agents. He added that with all the categories of businesses, from offline stores to travel and hospitality, gradually opening up, digital payments will only grow in the country.

The pandemic has also helped people realise that transactions are possible at the tap of a finger on the smartphone, without them needing to step out or go to banks. Which is why, perhaps, when investments in the Indian start-up ecosystem have been tumbling heavily, fintech managed to raise the most funding when compared to other sectors (as per data from Tracxn, a firm that tracks investments and financials of private companies and start-ups).

The new normal

The post-Covid world is changing the dynamics of doing business, said Instamojo’s Gehani, adding that having an online presence is now mandatory for businesses to survive. “And it is obvious, if you want to have digital presence then you definitely need payments integrated into it,” he said.

Gehani added that many businesses would be coming online for the first time, and fintech service providers would need to design their products in such a way that businesses don’t get overwhelmed.

With social distancing being the new norm and people having inhibitions about using cash due to fear of contracting the virus, it might become imperative for businesses to incorporate contactless payments to sustain in the post-Covid era. This being the case, what other advancements would make the transition to fintech more seamless?

There could be a push towards making the merchant discount rate (MDR) on card payment lower or maybe zero and, from a regulatory perspective, the government might put in effort to remove all fees on digital payments, said BharatPe’s Grover. He added that WhatsApp Pay, which is expected to be launched soon, will be an even bigger phenomenon, because with almost everyone using the app, it will help digital payments reach the interiors of the country.