As contactless payments surge, a less-cash future beckons

If the objective is to accelerate contactless payments, the immediate priority would be to replace conventional cards with contactless cards, especially debit cards.

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India is a mobile-first market where an entire generation has leapt from landlines to smartphones.

Powering a 5x growth in contactless payments in just 5 years, India is the fastest-growing digital payments market and firmly on course to emerge as a major less-cash economy

With technology touching and transforming every aspect of our lives, it has also impacted the way we shop and pay. There has been a marked shift to e-commerce and a rise in digital payments. The Indian consumer is now swiping, dipping and tapping, their card or inputting payment data into personal phones and smart devices. The number of tap & go transactions are surging by the month, and a recent Mastercard study revealed that a good 77 per cent of consumers in India believe that the shift to contactless payments is here to stay.

Catering to the rising demand from consumers, even the number of merchants adopting contactless payments has grown five-fold in the past five years – from just 1.2 million in 2015 to over 8 million today – with innovative payment platforms further fueling the digital payments revolution in the country. Contactless payments, as a ratio of face-to-face payments, already account for 15 per cent of the transactions. Where typically it takes 4 to 5 years for a country to reach the 10 per cent threshold, India’s journey from 0 to 15 per cent in less than 2 years makes it possibly the fastest-growing market among the major economies globally.

Tech-tonic shift

Enabling this switch to contactless payments, technology has been a key catalyst, with user-focused advancements aligned to shifts in consumer behaviour. Today, for a contactless payment solution, all one needs is a smart device and an internet connection to make transactions happen; the everyday smartphone has transformed itself into a wallet as well as a merchant Point of Sale terminal.

New methods of payments like contactless cards, QR codes have come to the fore, further securing payments and making them simple and seamless. The wide-scale adoption of contactless payments is attributed to two key factors – ease of use and enhanced security. Contactless payments are not only effortless but also safe under the secure encryption technology at its core.

With contactless payments, the consumer is in control. The contactless-enabled card or device doesn’t leave the consumer’s hand to make a transaction, and this makes it much safer. Sensitive payment account information such as the 16-digit account number, expiration date and the CVV code remains more protected. The tap & go technology ensures a fast and safe approach to digital payments. As technologies mature and the user interface is further improved, the prevalence of contactless payments will only gain in currency in the years to come.

The way forward

If the objective is to accelerate contactless payments, the immediate priority would be to replace conventional cards with contactless cards, especially debit cards. Given that contactless payments typically have an inverse relationship with ATM usage – 90 per cent of customers use their debit card only for ATM withdrawals – providing contactless cards will encourage consumers to use their debit cards for making payments. Even if the card is not contactless, one can link the data to their mobile device to tap the phone and make a payment.

We are on course to reach the critical mass mark of 50 per cent much before the 8 to 10 years other countries usually take. India is an economy of small businesses; we have over 60 million small and medium enterprises that contribute 35 per cent of the country’s GDP and provide 40 per cent of the employment. This is the segment that has been immensely impacted in recent times but possesses tremendous potential to scale up with the adoption of digital tools and contribute notably to increasing the penetration of contactless payments in the country.

India is a mobile-first market where an entire generation has leapt from landlines to smartphones. On our part, as enablers, we are working with new technologies to frame solutions that will empower small businesses as well as consumers to go contactless for making easy and secure payments. It’s just a matter of a few years before India goes contactless on a large scale and emerges as a truly cashless economy.

by Vikas Saraogi, Vice President – Acceptance, South Asia, Mastercard

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