While some in India would put the demonetisation exercise of November 2016 at the heart of this transformation, this trend is not limited to India. At a global level, millennials are flocking to alternate payment options due to the convenience and security that they offer. In India, with the phenomenal rise in the use of smartphones and internet-enabled devices, millennials have moved from carrying cash to using applications for a variety of different transactions.
The payments ecosystem in India has seen an incredible growth in the last year, and not just due to demonetisation.
The rise in e-commerce has meant that many transactions have now moved to the online arena, where payment through digital systems is more in line with the seamless systems that power the Amazons and Flipkarts of the world.
Digitally influenced spending on the rise
As per a survey done by Boston Consulting Group, digitally influenced spending is currently about $45 billion to $50 billion a year, and that figure is projected to increase more than tenfold between $500 billion and $550 billion. Digitally influenced spending is expected to grow from 30 percent to 35 percent of all retail sales by 2025.
Millennials are far more likely than any other demographic group to use their cellphone to discover, pay, and receive their purchases from the comfort of their homes without ever having to actually “shop” in the conventional sense of the term.
Furthermore, the success of digital payments services has meant that several retailers are more open to alternate modes of payment. Digital wallets allow anyone with a mobile phone to receive payments, and retailers are finding it easier to account for their purchases at the end of the month using the generated digital record of transactions. They no longer have to care about procuring, maintaining, and operating complex card-swiping systems as long as they have an account with some of India’s more popular digital payments systems.
Consumers are also less afraid of losing or misplacing cash, or even about having it stolen. Digital wallets use passwords and verification systems to ensure a level of security that cash can never match up to.
Research by BCG has found that about 70 percent of those who have access to the internet go online to make informed purchase decisions. This number varies among categories of products and services, but it is on the rise everywhere.
These digital payment systems and services have also integrated other value-added services that add to their allure and make them attractive to millennials, who are more comfortable with the idea of credit than their parents’ generation. Some companies even allow their users to take short and medium-term credit, paying for the product and taking convenient instalments from their customers over time. This allows them to defray the large capital costs of buying items like electronics, and distribute the impact across time.
When it comes to monthly payments and liabilities, online facilities offered by all of India’s leading banks provide easy options to transfer or accept large sums of money. Whether it is accepting your salary or paying your utility bills, the use of digital payment systems removes the chronic problems of either posting a cheque or depositing it by hand in some out-of-the-way office. Many banks also offer an automated system so that your credit card bill or mobile phone bill can be automatically debited from your account balance.
The conventional wisdom that credit and debit cards were well and good, but that one needs some cash in the wallet at all times is finally becoming outdated. Convenient and credit-friendly –sometimes even offering you the option to pay later – the digital payment era of the Indian economy has dawned.