Increased apprehension among consumers during the pandemic towards physical modes of payments is giving rise to a new category of digital payments spends which are ‘contactless’ in nature, say industry insiders.
These payments are driven predominantly by the use of technologies such as tokenization, Near Field Communication and Quick Response (QR) codes.
The shift towards contactless is not only an attempt to drive adoption, but also to remove legacy challenges that had constrained growth such as high costs of merchant acquisition and friction in payment experiences, leading stakeholders told ET.
“With coronavirus, there is fear among consumers to make card payments where there is any form of physical interaction” said Sanjeev Moghe, Axis Bank’s executive vice president and head of cards & payments. “We are attempting to remove any unnecessary touch thereby making payments safer.”
The private lender says 70% of its 5 lakh PoS devices can process contactless transactions. The bank recently partnered with Mastercard and Worldline to offer the functionality of POS machines to smartphones of merchants through a contactless technology called Near Field Communication (NFC).
The move not only dovetails consumer and merchant demand for contactless payments but also significantly reduces costs of devices, Moghe had explained at the time of the launch.
As of June, while about 14-15% of total card-based transactions in volume are through contactless modes, about 40% of the 50 lakh PoS devices are said to accept contactless card payments, according to experts. Latest RBI data also shows banks have additionally deployed 2.1 million Bharat QR codes for contactless payment acceptance as well.
Meanwhile, metro projects in Delhi, Bangalore and Kochi are all learnt to be piloting the use of NFC based contactless card payments when the public transit services open later in the year.
“Near field communication (NFC) technology allows for ‘tap and pay’ on payment terminals and via mobile phone payment apps,” explains Amrish Rau, CEO of Pine Labs – a leading payments player. “Merchants and customers both benefit from the speed and efficiency of NFC-based transactions.”
These efforts to move towards contactless have been further expedited by the Reserve Bank of India’s new guidelines that allow contactless card transactions below Rs 2000 to be accepted without any PIN authentication, as reported first by ET in April.
Card network operators such as Visa and Mastercard along with leading banks are now attempting to increase the limit to Rs 5000 in a recent representation with the central bank, as per people in the know.
Meanwhile, ATM operators too are sensing an opportunity to realign processes to make the cash withdrawal process contactless as well. Banks such as State Bank of India and Bank of India were the early movers in the space by bringing OTP based withdrawal.
“It’s a contactless and card-less process, customer just has to scan the QR code to withdraw money, this service is becoming popular and few banks have already launched it, we expect several banks to take this service,” said, Ravi Goyal, Chairman, AGS Transact – among the first manufacturers to build prototypes of such teller machines.
Ashish Ahuja, COO of Fino Payments Bank said that the company is working with NPCI to pilot a system that uses face recognition technology for withdrawals at miro-ATMs through Aadhar-enabled Payment System.
According to NPCI data, AePS transactions in Q1 FY21 crossed 1205 million worth around Rs 53000 crores. This is a growth of 104% in volume and more than 60% in value over Q4 FY20. UPI too saw transactions at a record high in July clocking 1.5 billion transactions, as per NPCI data.