By nearly every measure, 2020 promised to kick off a decade of incredible challenges and opportunities for the payments industry and its constituents. Rapid innovation brought about new ways to pay and be paid for consumers and businesses. Buyers in markets around the world were faced with a seemingly ever-increasing array of payment choices at the point of sale such as contactless, QR code, digital wallet, and so on – each offering value to coax buyers into trying these new payment experiences. Then COVID-19 hit. Movement controls and lockdowns disrupted commerce in unprecedented ways; accelerating an already active migration towards more digital forms of payments, challenging consumers and businesses to rethink how and where they buy, sell, pay and get paid. This in turn creates opportunities for those businesses that could efficiently adapt, and very real, existential threats to those unable to change.
Visa has been collecting insights into consumer and business payments trends throughout the pandemic. Through this article, we would like to share three definitive developments that every business in payments needs to know in order to address near-term headwinds.
eCommerce: Accelerating
Retail categories like food and groceries, fuels and healthcare saw a strong uptick during the early days of lockdown as consumers looked online for ways to meet essential daily needs. At this point of the pandemic, we have a clear picture of how quickly online shopping has consistently grown in the region. In Asia Pacific, the volume of eCommerce retail transactions in the first half of 2020 has already surpassed the whole of 20191. In the food and grocery delivery category alone, we have seen a nearly 50 percent increase in transactions from pre-COVID levels.
As a result of movement restrictions, businesses have started to sell remotely in ways they never have had to before. Retailers that have survived or even thrived, share some common traits - the agility to have migrated online, managed payments well and offered customers a range of options for order collection and fulfilment. Consumers are expressing a growing preference for digital payment alternatives which are contact-free2 as orders are completed remotely without the typical retailer-customer interaction.
During this period, we also saw a significant number of first-time online buyers. We know from years of analysing consumer purchase behaviour that once a shopper purchases online, they are likely to continue to do so. We expect these consumers to become more comfortable and confident and believe these newly formed online buying habits will persist even after the pandemic. With new sets of consumers adapting to digital shopping to maintain social distancing norms, even smaller merchants or kirana stores are migrating or keen to migrate online. During the initial days of the lockdown in India, we saw demand only for essential items, as one would expect. With lockdown restrictions being eased across the country, discretionary purchase categories like apparels and electronics have seen substantial growth in the recent past. Business related expenses (bulk business purchases made online, cloud services, etc.) are also showing an upward trend, which is a positive sign as MSMEs join back the economic bandwagon, which is vital for the overall growth of the economy.
Online categories that have seen substantial growth in overall spend share compared to the pre-Covid era are e-commerce, insurance, food, grocery and healthcare. In some of these categories, this indicates a shift in consumer preference, where payments are being made online for products and services that were traditionally predominantly bought offline. Now online payments account for a greater share compared to face to face payments, both in terms of volume and value of transactions.
With the festive season around the corner, we expect to see further acceleration of e-commerce spends and an increase in the average ticket size of purchases, both of which will be vital as the Indian economy bounces back from the impact of the pandemic.
Increasing preference for contactless
As COVID-19 confined consumers to their homes and made them wary of potentially infectious surfaces, one of the early trends to emerge was the momentum in usage of contactless cards among consumers and merchants alike. People across the world were looking for a convenient, secure and safe way to pay and that veered them toward using digital payments.
For retailers too, the increasing adoption of contactless payments is good news for business. On average globally, we have seen a 20 percent lift in card transactions following the rollout of tap to pay in stores. Between February and April 2019, contactless payments in India grew by five times3. Data reflects increasing dependence of Indians on smartphone-based payment solutions, which are by nature contactless and in line with the new hygiene and social distancing protocols.4
Between the rapid change of consumer behaviour and what we expect to be long-term caution around infection risks, we believe that contactless is here to stay, even within in-person payment environments.
In India, contactless payment has seen a steady growth every month since the lockdown has been relaxed. In categories like drugstores, department stores, restaurant takeaways, we saw a 4-6% increase in contactless penetration compared to the pre-lockdown era5, which shows increasing customer preference for contactless payments. We expect to see continued growth, especially with the cap of Rs. 2000 being removed for contactless payment and with increasing investment in communication and training in-store personnel in merchant outlets.
Fraud management becomes a business priority
These rapidly changing ways of paying are also driving changes in how criminals commit payment fraud. How and when people buy and pay means retailers need to adjust strategies to ensure they are dealing with genuine buyers and successfully screening out fraud. Data is the natural progression of going digital and here is where data could be your best friend or worst enemy. The vast amounts of data that is exchanged in online commerce presents a treasure trove for criminals mining personal data. But in the right hands, data that is processed securely through fraud monitoring systems enables organisations to harness better insights to stop fraud from happening in the first place. It is important to note that lowering fraud is not the only outcome rather, it is the confidence that comes with knowing that every transaction is safe and how this then leads to increased sales that matter the most.
Managing fraud has always been important but it has now climbed its way up the priority ladder. One challenge with the pandemic lies in how modern fraud-monitoring systems rely on models trained on past sets of good and fraud transactions – and as we’ve discussed, the current situation in payments is unprecedented; today’s purchase patterns don’t have a historical benchmark.
Without a doubt, the pandemic has altered consumer behaviour and fast-tracked the digital agenda for many businesses. The Visa Consulting & Analytics team has been working with many partners; and bringing to bear a combination of deep payments expertise, our breadth of data and economic intelligence to help drive better business outcomes.
If you are keen to transform your business to get ready for the future of commerce and payments, get in touch with us at https://www.visa.co.in/partner-with-us/visa-consulting-analytics.html
- Ranadurjay Talukdar
Regional Lead, Visa Consulting and Analytics, India and South Asia
1 Asia Pacific VCA analysis, July 2020
2Banks, payment operators want to render “contactless” digital services - The Economic Times
3 Asia Pacific VCA analysis, July 2020. Refers to contactless domestic face-to-face transactions as a proportion of overall domestic face-to-face transactions
4 Record transactions worth Rs 5.99 lakh crore via mobile apps in June - The Economic Times
5 Visa Consulting and Analytics, India and South Asia