More festive spending in India this year will be digital: study

A study of 1,008 people in six metro areas shows what contactless and touchless payments offer to their middle class.

As the world goes into the year-end holiday spending mood in spite of the pandemic, let us zoom in on the situation in India.

According to one real-time digital payments solutions provider, digital payments in the huge country continue to be the preferred payment method for 39% of consumers, ahead of debit and credit card payments (26%) and cash (26%).

Digital payments, including e-wallets and unified payments interface (UPI) payments, were used by 57% of respondents more than twice per week for festive season purchases, up from 43% a year ago.

Increased digital payment volumes were also being driven by ‘power users’ with one in three (29%) using digital payments at least once per day, up from 15% last year.

Other key data

Provided by ACI Worldwide and analytics firm YouGov, the following findings were gleaned from a sample population of 1,008 adults polled in November 3-5 this year. The survey was carried out online. The figures have been weighted and are representative of all Indian adults (aged 18+) in the following Tier 1 metro areas: Mumbai, Delhi NCR, Chennai, Kolkata, Bangalore, Hyderabad.

• Payment and spending trends

In the 25-34 age group, digital payments were preferred by 47% of respondents, over the 39% average. The over-45 group preferred card payments and digital payments almost equally (33% and 34%, respectively).

• Only 9% avoided digital payments completely during the study period compared to a year ago (10%).
• 21% used digital payments for purchases of US$135–675 during the study period. Only 4% made purchases exceeding US$675.
• 63% were using digital payments for groceries and essentials during the study period. Nearly half used digital payments for electronics, including mobile (48%) and fashion purchases (47%).

• Consumer concerns and industry opportunities for digital payments

• Failed transactions were a top concern for 44% of respondents, up from 36% last year.
• Fewer consumers were concerned about internet connectivity for completing digital transactions compared to last year (32% down from 44%), and fewer were concerned about merchant acceptance infrastructure (15% down from 23%).
• 37% cited data privacy as a top concern (40% last year), while 13% had no concerns.
• The most common fraud-related concern was fake apps or websites that are part of a scam, cited by 42%. Forty percent also had concerns around fraudulent Know Your Customer updates and fake UPI payment links.
• 45% considered cash and payment on delivery as the most secure, ahead of digital (24%), cards (20%) and internet banking (11%).
• 85% believed that it was easier to use digital payments when making purchases in-store or at merchant locations compared to the same time last year.
• 90% believed authorities should continue to encourage digital payments adoption to maintain hygiene, safety and social distancing measures during the pandemic.
• More than 80% felt digital payments offered greater financial transparency (better insights into how, when and what money is spent on) compared to other payment methods. 84% felt digital payments offered better promotions, incentives or cashbacks than other payment methods.
• 35% were more inclined to use contactless digital payments because of guidance from authorities, slightly up from April 2020 (32% in April 2020).
• 22% were exercising greater caution when using digital payments during the pandemic, compared to 28% in April 2020.

Said Kaushik Roy, Vice President & Country Leader (South Asia), ACI Worldwide: “It is clear from this year’s data that digital payments are becoming more entrenched in the everyday lives of consumers, and for many, these convenient and secure payment types are undoubtedly the preferred choice. The pandemic has driven increased usage of ‘touchless’ digital payments—including UPI, which already recorded two billion monthly transactions in October—and contactless cards, which in an offline environment support the hygiene and safety measures being encouraged by the authorities.”

Noting the concerns cited by respondents, Roy said that continued successful growth of digital payment volumes and consumer confidence in the country will require providers of digital payments infrastructure to ensure they are operating stable, high-capacity systems.