Digital commerce is here to stay

December 30, 2020 | By Sandeep Malhotra

This article was originally published on CNBC India.

The changes brought about by COVID-19 in our working and personal lives will not roll back when its severity subsides or treatments render it less dangerous.

The disruption will have a lingering impact, particularly on marginalized sectors and communities – micro, small and medium enterprises and those employed in informal sectors like construction and agriculture.

The pandemic also alerted us to the vulnerability of cash and the resilience of digital technologies. Even with all of the restrictions at the time of lockdowns, commerce needed to keep flowing to fulfill basic needs. Digital technologies made this possible and quickly became a strategic and operational priority.

The immediate consequence was a sharp reduction in discretionary spending along with reduced cash usage. Discretionary spending initially sank by 40 percent globally, according to a McKinsey report.

Conscious of safety and hygiene, consumers shifted to contactless payments at the point of sale (POS) and digital commerce. According to a recent study, about 49 percent of consumers in India say they plan to use cashless often.

While the shift to digital payments is not new, it has accelerated rapidly over the last few months. Today, people are realizing how the “touch-free” aspects of contactless and digital payments can deliver personal safety benefits during the kind of social distancing and health protection measures we are seeing around the world.

The trend is clear, with 79 percent of people worldwide and 91 percent in Asia Pacific saying they are now using tap-and-go payments as they enable transactions without the need to touch a POS terminal or pass the card to another person. Alternative payment methods such as instant and mobile payments have also grown, while cards retained their strong incumbent position supporting e-commerce and POS transactions.

As communities and economies emerge from the pandemic, the new consumer mindset sends a clear signal that e-commerce and touch-free transactions are essential to building the business and ensuring customer loyalty now and in the future. Even brick and mortar shops rushed online during the pandemic as they understand the benefits of going digital to improve cash flow, gain access to wider markets and reduce the friction of depositing cash or cheques.

Companies in the payments industry – and our partners in the financial sector, fintech community and governments – have a critical role to play in helping people to embrace the new normal as consumers move swiftly to contactless payments and real-time account-to-account payment solutions developed in recent years.

The industry continuously innovates to introduce products and solutions with improved benefits for consumers, merchants and banks around speed, flexibility and security. For consumers, the payment process is moving into the background of the shopping journey as they expect seamless convenience combined with maximum protection of their transactions.

There can be no tradeoff between speed and security. The rapid migration to digital commerce during the pandemic also led to a rise in cyberattacks and payments fraud. India saw a 37 percent increase in cyberattacks in the first quarter of 2020, as compared to the fourth quarter of last year.

Newer users who are not digital natives are more at risk. To build a safe payments landscape, all partners in the ecosystem must collaborate and share intelligence to minimize threats. The use of technology like biometric authentication and Artificial Intelligence (AI) can help in detecting fraud by uncovering anomalies and spotting suspicious patterns.

The pandemic has also opened new avenues to use data. Employing analytics to track and make sense of information and patterns helps businesses to deliver insights that inform strategy and operations. By creating a digital identity for each customer, companies can provide a more engaging and personal experience while improving efficiency and combatting fraud.

Innovation and value propositions must align with the new normal of seamless and frictionless digital commerce. As the consumer experience becomes a major competitive differentiator, the payments industry must keep evolving to cater to changing preferences and expectations – without ever compromising on safety and security.


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Sandeep Malhotra, Executive Vice President, Products & Innovation, Asia Pacific, Mastercard