Impact of Coronavirus on the digital payments segment in India

The ongoing spread of the COVID-19 has become one of the biggest threats to the global economy and financial markets. To contain the impact of Coronavirus outbreak, countries across the globe are taking numerous measures including restricting the movement of people; locking down cities; closing public places like malls, cinema halls, tourist sites with an appeal to the public to stay indoors, maintain social distance and avoid unnecessary travel.

Amidst the fears associated with the impact of Coronavirus, India is witnessing a gradual lockdown and if the count of affected people continues to grow, the situation might further deteriorate. Businesses at large are affected; for instance, the fall of sales in China due to lockdown is sending a wave of fear across the globe.

The UN Conference on Trade and Development has estimated that the Coronavirus outbreak might cost the global economy $1-2 trillion in 2020. The trade impact of Coronavirus for India is estimated to be around 348 million dollars. Besides, Moody’s Investors Service has reported that COVID-19 will likely depress global growth in 2020 below 2.5%.

Impact of Coronavirus: How India’s Digital Payments Industry is affected?

The adverse effects are trickling down to major sectors of the Indian economy with retail, aviation and hospitality feeling the brunt of the slowdown. Digital transactions, both online and offline, processed by leading firms are bearing the impact due to restrictions in place to curb the COVID-19 outbreak before it becomes uncontrollable. While customer traffic on digital channels is still high, the value of transactions has significantly declined. If the situation continues to persist for a longer duration, businesses in the digital payments sector are going to suffer for the next two-three months as people would remain cautious of going out.

The unpredictable times we are living in, where the impact of Coronavirus outbreak is plunging in economic as well as social sphere, it may have a temporary impact on shopping patterns, among others. It might be a big boost for ecommerce including grocery, entertainment and food.

Going in the background, in the last four years, digital payments have grown immensely from a mere 5% to over 30%, backed by demonetisation and sustained campaign by the Government to move towards a cashless Indian economy. Online Travel Aggregators, movie and event booking portals and entertainment industry, together form a major part of the digital payments industry in India, contributing to almost 40%. The rest comes from utility bills and financial services segments.

However, FinTech experts believe it is too early to analyse the impact of COVID-19 on the industry, whether the digital payments will go up or there will be some short-term impact. The effect could only be ascertained in the next 15-20 days, whether there has been a rise or fall in the digital payments as travel and tourism were down since the start of the year.

Impact of Different Sectors on Digital Payments

While some sectors that were directly hit by the COVID-19 outbreak have pulled down the usage of the digital payment, some new sectors have also emerged.

Segments that are expected to adversely impact digital payments in India due to COVID-19 include Airlines, Travel/Tourism, Hospitality, Retail, Theatres, Restaurants, Clubs and Entertainment Parks. Whereas sectors that will boost digital payments include small grocery stores, online money transfer, OTT, online gaming, online education, ATM withdrawals and broadband usage.

RBI Urges

The government has asked banks to encourage their customers to use digital payment methods as a precautionary measure against the Coronavirus outbreak. Meanwhile, RBI has also urged customers to use digital banking facilities amid the Coronavirus outbreak. In light of recent events, NPCI has also started a campaign called ‘India pay safe’ in order to boost digital payments since exchanging cash could spread Coronavirus. NPCI CEO even shared a video for the campaign. Soon, several other digital payment players such as Pine Labs, Ongo, PhonePe and Amazon Payments also showed their support for this move.

With continuing fears of the impact of Coronavirus on the global economy, it is also plunging stock prices and bond yields, hurting investor sentiment and bringing down stock prices in major markets.

By Sunil Khosla, Head Digital Business, India Transact Services Limited (ITSL)