Coronavirus Lockdown: Digital payments slump as non-essential services dry up

As the nationwide lockdown hits the 34-day mark, a report by fintech player RazorPay suggests that digital payments and transactions have seen a significant 30% dip in the course of the lockdown. The ‘The Era of Rising Fintech’ report is based on transactions on Razorpay’s platform between February 24 and March 23 (pre-lockdown) and March 24 to April 23 (post- lockdown).

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It says that unified payments interface (UPI) transactions saw a 37% fall, cards 30%, and net banking 28% fall during the lockdown, compared to the previous month. However, in terms of volume, UPI made the highest contribution of 43%, followed by debit and credit cards with 39% and netbanking with 10%.

Among the major UPI payment players, Paytm fell by more than 47%, Google Pay at 43% and PhonePe at 37%.

This slump, the report states can be attributed to a crash in the consumption of non-essential items.

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The report is not all gloom though. It says that online spends on utility bills, media and entertainment, as well as donations to NGOs saw a sharp jump. “Sectors such as utilities (Bill Payments), IT & software and media and entertainment saw a growth of 73%, 32% and 25% respectively,” it said.

The lockdown has, as expected, resulted in a huge decline in sectors such as logistics and travel. The report states that transactions in logistics dropped by a whopping 96% due to gaps in supply chain.

The travel sector saw an 87% slump, followed by real estate by 83%, food and beverage by 68%, and grocery by 54%. While digital transactions in Ahmedabad, Mumbai and Chennai took a hit, Karnataka (with 21%), Maharashtra (16%) and Telangana (11%) saw the highest contribution during the lockdown.

Significantly, mobile wallet transactions, particularly in Tier-2 cities, registered a surge in the last 30 days, with transactions through JioMoney increasing by 66%, AmazonPay by 63%, and Paytm by 43%.

Harshil Mathur, CEO and Co-founder, Razorpay, said: “A significant drop of 30% in online payments in a month is something we are seeing for the first time after demonetisation.”

He added that in the first two weeks of March before lockdown, the overall online spending increased by about 10%, but later saw a dip due to social distancing norms that resulted in more people staying indoors.

According to Mathur, while the pandemic continues to create uncertainty on a number of fronts, it is also a turning point for the fintech industry in many ways, one such being the tremendous adoption in the use of digital payments, especially in Tier 2 & 3 cities.”

Looking at the future, Mathur is optimistic. He added, “I believe this is a huge opportunity for fintech companies, some of them may have to reexamine their business models after Covid-19, prioritising growth and customer acquisition over profitability.

He states that there will be more collaboration and trust between banks and fintech companies as new digital tools will be integral to any bank’s strategy in the post-coronavirus world.