Money & Banking

Indian consumers warm up to digital payments

Amrita Nair-Ghaswalla Mumbai | Updated on November 09, 2019 Published on November 09, 2019

Representative image   -  Getty Images/iStockphoto

Digital payment companies invest strongly in brand building and are overt in their efforts to deliver an engaging customer experience

A new report has found that early adopters of digital payment tend to hail from China and India.

The integration of financial services with social media services from Alibaba and WeChat has helped 93 per cent of the consumers in China to migrate to digital payments or neobank services. Likewise, the popularity of PayTM in India has helped 50 percent of Indians utilise the next-gen services, according to the report by market research agency Kantar.

A neobank is a digital bank without any branches, with the digital operation reaching consumers on mobile apps and personal computer platforms only.

Though Alipay, PayTM, WeChat Pay, Nubank and the likes have widely been considered a revolution in retail banking, their impact on the traditional retail banking market has yet to be fully felt. In a survey of 3,000 banking customers around the world, Kantar found early adopters prominently hailing from China and India.

Chinese consumers are the champions of digital payment usage, as almost everyone (93 percent) with a bank account does business with one or more of the local neobanks: Alipay, WeChat and JD Finance.

Though the integration of payment apps in social media platforms tends to play a significant role aiding the movement, the report notes that it does not provide the full picture given the significant level of penetration enjoyed by Alipay and JD.

India has the second-highest market penetration, according to the report at 50 percent, followed by Brazil at 35 percent. Within other more traditional banking markets, neobank penetration averages considerably less than 5 percent - in the USA it is only 2 per cent and in Singapore, less than 1 per cent.

The report shows Chinese retail banking differs significantly from the other markets: on average, customers make use of at least two of the three key digital payment banks - Alipay, WeChat or JD. This level of use is unparalleled, according to the report.

Airtel vs Paytm

In India, the tough fight between digital payment majors Airtel and Paytm was showcased, with Airtel at 15 percent versus PayTM at 46 per cent usage.

Reg van Steen, the lead author, points out in China, India and Brazil, neobanks have made the leap to the mainstream. Elsewhere, consumers are still just 'checking them out' or 'cherry-picking' particular benefits. He adds though traditional banks are very good at being fast followers in the market place, they need to move beyond functional needs and tap in to emotions.

Highlighting customer appeal and trust, the report showed that neobanks in Brazil, China and India have established an equal footing with traditional banks, and that neobanks are liked more than they are trusted by their own customers.

This could be because neobanks tend to invest strongly in brand building and are overt in their efforts to deliver an engaging, innovative and often responsive customer experience.

Brand appeal

Brand appeal also plays an important. Though 'free and easy' is not a term associated with banking, in the case of neobanks, with their userfriendly app interfaces, the report notes this is usually the case. Neobanks are perceived as contemporary and innovative, making them attractive to young people and anyone keen to embrace a digital lifestyle.

Existing banks appear to be closely following what the neobanks are doing and are quick to imitate app features and benefits. However, neobanks moving away from providing typical banking services are expected to hold them in good stead. Like Airtel Payments Bank which partnered with private sector general insurance company HDFC Ergo to launch a mosquito disease protection policy.

At only Rs 99 per annum the policy provides cover against seven common mosquito-borne diseases. The policy is currently available to 4 million remittance customers of Airtel Payments Bank.

The partnership aims to bring together the deep distribution network of Airtel Payments Bank and the strong innovation pipeline of Hdfc Ergo.

Anubrata Biswas, MD and CEO, Airtel Payments Bank said through the product construct the company aims to introduce "easy and sachet size paperless insurance solutions to millions of customers."

Anuj Tyagi, Executive Director and Chief Business Officer, Hdfc Ergo General Insurance said the company's PING group (Providing Insurance for Next Generation) has been developing products under the umbrella of 'wallet products portfolio'. He added, "Wallet products will change the way customer perceive or buy insurance products."

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Published on November 09, 2019
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