Changing Consumer Preference Is Driving Digital Payments

From the beginning of the coronavirus pandemic in India, a nationwide lockdown was imposed to ensure the safety of people. Confined in their homes, people heavily relied on e-commerce for the purchase of groceries, health products and other essentials. Even now as the lockdown has eased, consumers are preferring to shop online as they want to minimize social interaction. E-commerce and digital payments were gaining momentum before the pandemic; however where we are today in terms of number of transactions is largely attributed to the safety concerns that people have.

This has led to massive e-commerce sales, with big e-commerce players leveraging this boom by introducing festive and end-of-season sales. One of the important drivers of e-commerce is the adoption of a digital-first approach. According to a survey by Razorpay, e-commerce transactions have increased by 71.31 per cent from April 2020 to September 2020. E-commerce continues to be dominated by the top states of the country, with Delhi, Maharashtra and Karnataka making up for over 65 per cent of consumer demand.

However, there is also a growing trend of shoppers from Tier II and III cities. The likes of Flipkart and Amazon also have been focusing on new consumers from smaller cities with initiatives like vernacular language support, wider PIN code coverage and quicker deliveries. Tier III markets have witnessed a year-on-year growth of 53 per cent in e-commerce adoption, with fashion and apparel being the drivers of change.

Having experienced the ease and convenience of digital payments in the time of crisis, and the ease of getting goods delivered at their doorstep, consumers feel confident about ordering online and making digital payments. Though it has been observed that consumers prefer easy user experience and expect smooth, hassle-free payments, lack of preferred payment options has led to a drop in total sales.

Card-on-file transactions come in handy here. With the card information already saved on the merchant's website, the consumer only has to enter the CVV number to make the transaction. It is easy and safe; consumers don't have to fret about keeping any particular amount of cash with them or allowing physical contact. Card-on-file is completely secure with a solution like tokenization, where the card information is saved in tokens - a set of random numbers on the merchant's site. So, in case data from merchant site is compromised, even then, the card details are safe.

Mastercard, along with various banks, is using this opportunity to enhance the digital offerings to provide customers a smooth journey for managing money while ensuring safe online payments. Mastercard's goal is to provide safe payments options to the consumers.

India's e-commerce festive sale season from October 15 to November 15 this year delivered $8.3 billion worth of gross sales for brands and sellers, up 65 per cent from $5 billion last year, according to a report by research firm RedSeer. According to the India Brand Equity Foundation (IBEF), the market opportunities for online commerce in India are expected to touch $200 billion by 2026 from $30 billion in 2017.

Covid-19 has undoubtedly boosted e-commerce transactions and consumers are prepared for a permanent shift. Hygiene has become one of the primary reasons for adopting new payment methods, whereas factors like convenience, increase in trust, ease of use, easy returns, acceptance and incentives have given impetus to this adoption. These factors will likely continue to determine the default behavior of consumers in the long run.

(Rajeev Kumar K is Senior Vice President, Market Development, South Asia in Mastercard)

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