Digital Payments Transactions Increase during Covid-19

Soniya Khanna

06 Jul, 2023

Digital payments transactions witnessed a continued rise with many digital platforms seeing record high transactions. According to the data released by the National Payments Corporation of India, its official twitter account displayed increased adoption of digital transactions due to Covid-19 related restrictions across the country.

Rise in Unified Payment Interface (UPI) Transactions

As per data, transactions on UPI increased to 11% to 2.90 lakh crore rupees in July from 2.61 lakh crore rupees in June. UPI related transactions have nearly doubled from 1.46 lakh crore rupees in the month of July 2019.

 As per data provided by National Payments Corporation of India (NPCI), there were 149 crore transactions made through UPI in July 2020 compared to 134 crores made in the month of June. It hit an all-time high. On a month to month basis, it registered close to 9% growth from 1.23 billion in May. UPI payments had gone down in terms of volume with transactions worth 1.5 lakh crore in April.

Digital payments gradually gained momentum from May as in the month of May, as per NPCI data, the number of UPI transactions stood at 1.23 billion valued at 2.18 lakh crore rupees.

The number of transactions via all the available means on the NPCI platform had been going up since October last year but dipped in April this year. However, it soon regained more than 1 billion transactions in terms of volume in the month of May.

It may be noted that UPI is a system that allows multiple bank accounts into a single mobile application, merging several banking features, steady fund routing, and merchant payments into one hood. The National Payments Corporation of India launched Unified Payment Interface with 21 member banks in the year 2016.

Rise also witnessed in IMPS transactions

Transactions on the Immediate Payment Service^[1] (IMPS) platform dipped to a historic low in the month of May this year and have been gradually rising since then. Now they are at an all-time high. IMPS transactions stood at 2.25 lakh crore rupees in the month of July this year, rising by 9% from June. Transactions have grown by 24% from last year. It was at 1.82 lakh crore rupees in the month of July 2019.

IMPS stands for Immediate Payment Service, and it is a money transfer mechanism that is made available by the Reserve Bank of India and NPCI. It transfers funds immediately and is a great banking platform in emergencies. 

Surge in Digital wallet transactions

Digital payments firms like PhonePe, Paytm, Amazon Pay, etc. have witnessed a close to 50% surge in transactions through their e-wallets or digital wallets since the Covid-19 crisis. It has caused them to focus on the payment instrument.

This surge in digital wallet transactions is primarily due to the impetus in digital transactions as customers chose online methods in place of cash. PhonePe witnessed a surge in the number of new users and wallet activations. They believe the main reason for this is the reluctance to handle cash and customer feeling safer with contactless commerce. 

A Paytm Payments bank spokesperson told that they had been focussed on wallets, and it continues to be a trendy method of payment, contributing a significant share of its monthly transactions. 

A critical reason for payment firms to leverage their digital wallet offerings is to retain customers as they offer cashback and refunds to the customer’s wallet. PhonePe and parent Flipkart provides cashback to the e-wallet of customers, which can be utilized across the Flipkart ecosystem. Gurugram based e-wallet MobiKwik provides credit to customers in their digital wallets to increase commerce and transactions.

Digital wallet transactions have increased and have almost doubled from last year. This has encouraged many new players in the market. Even food delivery player Swiggy has initiated its digital wallet in association with the ICICI bank. In the future, you may hear more players following the trend. 

What can be attributed to the increase in Digital Payments transaction in recent while?

As we see gradually, states in India unlocking itself from Covid-19 restrictions, physical transactions by way of cash have mostly been still avoided due to the fear in the minds of people due to the spread of Covid-19. As the flow of cash in malls or other markets has been null, people have shifted to online shopping, online courses, and entertainment applications as a way of spending money during restrictions that have increased the use of digital payments.

Another factor to take note here is, ATM accessibility has been limited due to the fear of contracting this virus. This has worked in favor of digital payment. The National Payments Corporation of India insisted people use digital payment methods and stay indoors. 

After demonetization and after the introduction of UPI, Covid-19 has forced people to shift to digital payment options. Now people, who were earlier reluctant to use this, have made peace with it.

Have digital payments transactions increased the risk of fraud?

Well, the fact of the matter is that with an increase in digital transactions over cash amid the Covid-19 pandemic, the fraud cases related to digital transactions have shot up. According to a report, close to 31% of consumers have been the victim of a card or digital payment fraud.

The report suggested that the vulnerability of fraud remains the greatest concern of consumers, followed by the risk of failed transactions, poor internet connectivity, and concerns to data privacy.  This also impacts customer trust in banks.

The Reserve Bank recently echoed the need for safe use of digital transactions. It has acted on many mechanisms to make sure that digital transactions are safely done, and it has carried out many digital campaigns. However, customer awareness is equally vital, going forward to thwart fraudulent activities.

 Conclusion

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