Top 5 Digital Payment Trends 2021 : India

Though cash remains the king in India, the Covid-19 pandemic has proved to be an accelerator for the adoption of digital payments. Covid-19 has accelerated adoption of online payment and digital financial services as more consumers & merchants are now rely on digital ways to pay & accept. 

But what’s coming in 2021? With the repercussions of the global pandemic expected to continue for some time, here are top 5 trends of the merchant digital payment space in India.

1. Digital Payment for Offline Retailers

Offline small and medium size merchants responded very well to the pandemic by moving to e-commerce, but this is just the start. In year 2020 we have seen the second wave of merchant digitisation in India after demonetisation in 2016. 

In 2021 more and more retailers will come online with the emergence of low cost payment acceptance methods like UPI and mobile ePOS. There are two sides of the trade that different players are eyeing to digitise- consumer sale & supplier purchase. Below are few trends that will be observed on the either sides. 

1.1. Consumer Payment (B2C payment) 

In-store payment 

Since, UPI has emerged as a preferred choice of payment acceptance among merchants, players like PayTm, PhonePe, Google Pay and Bharat Pe have acquired a lot of merchants in Tier-1 cities in India. The merchants are happy to accept digital payment without investing in POS hardware. This year will see the emergence of ePOS(mobile POS), where the merchant doesn’t have to make

any upfront payment for payment acceptance. This will find traction in Tier-2 and tier-3 cities. Also,RBI has increased the limit of Tap & Pay from INR 2k to 5k which will further result in an increase in the number of contactless transactions on ePOS via NFC. 

ePOS (mobile POS) will liberate merchants to go to various places like concerts, trade shows, food trucks, etc where they can seamlessly accept payments from their customers. 

Online payment 

Nowadays, small mom & pop stores are converting into Phygital (physical + digital) stores from purely physical stores with the help of players like JioMart, Amazon etc. Resulting in making these stores hyperlocal, enabling them to be discovered by the customer online via app. This is opening up multiple business opportunities like building seamless FinTech products to enable these merchants to send a payment link to customers, send payment reminders, accept payment for COD orders at time of delivery etc.

1.2 Supplier Payment (B2B Payment) 

B2B Payment 

Merchants have moved online to make purchase for the store powered by players like Udaan, JioMart, Flipkart Wholesale etc. Since, the purchase is happening online, the merchant enjoys a line of credit from these players who empower the store owner to increase business. The supplier/tech players will also open various insurance & loan products for retailers, who are still not issued loan by traditional banks. 

Store Upgrade 

Since stores have started moving online and are selling and buying using the digital platform, this will generate a lot of sale and purchase data of the merchant. This data will allow Fintech players to extend low interest short term loans. In 2021, a lot of these stores will be upgraded from local store to a branded retail store with typically, not much investment from the store owner. This will result in business operations getting digitised & physical stores getting modernised. These stores in future will also serve the following purpose: delivery partner for

any/all the services that the tech enabler provides like mobile recharge, open bank accounts, sell insurance, do the last mile delivery etc. 

2. Buy Now Pay Later

Buy now Pay later option empowers shoppers to buy now and make affordable payments over time. Some POS players like PayTm, PineLab etc. have also started giving EMI by brands and banks at point of sale. Players like Zestmoney is also allowing customers to convert their purchase into EMI when the customer is checking out online on mobile or web without credit card. 

LazyPay gives customer short term small ticket size credit with easy repayment options. Customers can easily checkout online with a single click and the same experience will get replicated for offline merchant payments via UPI QR code. 

3. Payments with QR Code will grow

There are a lot of players in this space like Paytm, PhonePe, Google Pay, Bharat Pe, PineLab etc. Growth of UPI has been a great success story for payment acceptance at the retail store, where the consumer can simply scan the QR code

and make payment from the bank account. There are about 40–45 million SMEs in India and the tier-2 and tier-3 cities are completely untapped. Hence, this year will see a huge growth in merchant acquisition and will enable the merchant to accept payment through QR code scan. 

In the quest for truly contactless payments during the pandemic, these methods will continue to prove their flexibility, especially in emerging markets, primarily because they are easy to use and inexpensive to implement. 

4. Payment in public transport

COVID-19 has been the catalyst for governments around the world to adopt digital services. This is becoming particularly visible in transportation, where we are beginning to see individual ticket sale systems with a fragmented approach to digitise elements of the infrastructure and replace the services end-to-end. 

Toll collection- FASTag is now mandatory for all vehicles as effect from February 15, 2021 resulting in NFC transactions to grow in 2021.

Metro Ticket- Chennai metro in their pilot have introduced a feature where customers can simply flash their smartphone at the metro station and make payment for their ticket. They are also planning to introduce a ticket payment system where a small chip attached to the phone will be scanned by a reader. Companies like Jio, PayTm are betting big on it and there will be traction in this space. 

Bus Ticket- Commuters can now purchase bus tickets through app or make payment via NFC using the pre-paid card/phone. Companies like Chalo are ready to disrupt this space in India. 

5. Biometric authentication

Biometric authentication is a trend that you’ll see quickly emerging in the year 2021. Biometric authentication is a verification method which involves biological and structural characteristics of a person. At ATM, the bank can validate the user through fingerprinting scanners, facial recognition, iris recognition, heartbeat analysis, and vein mapping and make the cash withdrawal contactless. Also, the same identification & authentication mechanism can be used for processing Net

banking and online PG transactions. AEPS will allow customers to make payment at PoS using the Aadhaar authentication. 

With Covid-19 still around, year 2021 ,will see potential innovation and penetration of digital payments in India. 

Guest Author, Abhinav Tyagi