Digital payment poster boys like Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Toll Collections (NETC), and Bharat Bill Payment System (BBPS) reported record plunge in volumes and values in April 2020.
Aadhar enabled Payment System (AePS) is the only channel that recorded increased transactions on the back of payouts of government’s relief fund to beneficiaries.
UPI, which has been continuously scaling over 1 billion monthly transactions, processed 99 Crore transactions worth Rs. 1.5 lakh Crore in April, according to the NPCI data. This is a decline of 20.8% and 26.7% in volume and values of transactions, respectively, as against payments processed in March 2020.
Similarly, IMPS saw volumes and value of payments plunge by a record 43.5% and 40.1% respectively as well. Fastag’s monthly collections in April fell by over 80% as against March. Even BBPS recorded a decline in payment volumes despite advisories by the government and regulators to customers to pay bills online.
Essentials Vs. Non-essentials
While we always felt that people spent only on essentials like food, grocery, and health during a crisis, it is far from reality.
According to Bobble AI, OTT platforms like Netflix, Amazon Prime, and Hotstar have seen a massive increase in their subscriptions and have seen a rise of 82.36% in time spent. It further adds people have spent 71% more time on video conferencing apps like Hangouts, Google Duo, House Party, and Zoom. They have witnessed a 104% increase in the active user count, as per the report.
Fitness applications like Lose Weight at Home, Cure.fit, and Home workout have seen a 39.50% increase in the time spent with a 14.72% increase in engagement rate and a 104% increase in daily active users.
E-learning services like Udemy, Unacademy, and Byjus achieved an 83% increase in time spent, a 122% increase in engagement, and a 25% increase in daily active users.
Social media apps like Instagram, Facebook, WhatsApp, and Twitter saw a 46% hike in time spent, a 49% increase in engagement, and a 30% increase in daily active users.
The new essentials
Look at where people are spending time, and none of them can be categorized as essentials. It is mainly entertainment, education, fitness, and information. I guess these will have to be added to the essentials of food, grocery, and health purchases when we look at the economic activity and, in turn, the digital payments during this lockdown.
India’s Internet consumption rose by 13% since the lockdown. There was a massive demand for cloud productivity applications and cloud software, high-end headsets, and ergonomic furniture was a part of the work from home infrastructure that was much sought after.
All of these needs will have to be brought under essentials and termed as the new essentials. I believe that this lockdown and the crisis is throwing up several new opportunities and novel ways of looking at work itself. This is something that the digital financial ecosystem should tap into for its revival and growth.
The usual poster boys of digital payments
Razorpay’s digital transactions report indicates that the transactions in logistics have dropped by 96%, the travel sector has declined by 87%, food & beverage by 68%, and groceries by 54%.
Spending in tourism, fashion, entertainment, and hospitality have been nil, adding to the woes of digital transactions and the overall economy.
There were no avenues for instant gratification or impulse purchases as most of those avenues were under lockdown. With the tendency towards avoiding discretionary spending, it would be a couple of quarters before things get back to normalcy where the non-essentials would start to drive the economy and the digital transactions.
MDR should be market-driven, and capping MDRs or removing MDRs will hinder the digital payments industry growth.