International Journal of Commerce and Management Studies (IJCAMS)

Volume 5, Issue 2
ISSN 2456-3684

THE IMPACT OF COVID 19 ON DIGITAL PAYMENT

SAJNA V

RESEARCH SCHOLAR

DEPAERTMENT OF COMMERCE

KARPAGAM ACADEMY OF HIGHER EDUCATION

COIMBATORE

Email Id: [email protected]

ABSTRACT lockdown; limiting movement of the entire population;

shutting down public places and transport; and urging
Social distancing, lockdowns, and other restrictions
the public to stay indoors, maintain social distance,
unleashed by the COVID-19 crisis is driving people to
and work from home. The resulting economic
switch to online modes to buy essentials and other
disruption is huge and the short term decline in activity
necessities. As people shop from the safety of their
for businesses large and small, considerable. With
homes to protect against the virus, financial
economic growth expected to be severely hit, the
institutions are experiencing an explosion in digital
financial outlook of the digital payments sector is no
payments. While financial institutions have so far
different and will follow a similar trajectory, at least in
ensured the availability of digital modes of payment
the short term. But the industry’s stability and
without any major disruptions, it is impossible to
potential for innovation will play an invaluable role in
predict how the crisis will play out in the coming
rebooting the economy in the new normal.COVID-19
weeks and months. To assess the impact of COVID-
has damaged both, demand and supply. With
19 on digital payments and prepare for unforeseen
lockdown across various parts of the world, many
situations, banks will need to expand access to digital
manufacturing and production units are shutting down.
touch points in a secure manner while ensuring round-
It led to a steep fall in the supply of intermediary as
the-clock availability. This paper discuss on relative
well as final goods. The COVID-19 crisis does not
impact of the COVID-19 pandemic on various sectors
seem to be a short-stay guest; it will result in the exit
and payment categories.
of many small to medium scale businesses from the
Keywords: COVID 19, pandemic, digital payment,
market. On the demand side, people are facing a threat
financial institution
to their livelihood, pushing the economy generations
INTRODUCTION back.

The ongoing spread of COVID-19 has become one of OBJECTIVE OF THIS PAPER
the biggest threats to the global economy and financial
markets. To contain the impact of the coronavirus  To understand the concept digital payment.

outbreak, India, like many countries across the globe,  To analyse the impact of COVID 19

is taking several measures, including a nationwide pandemic on business

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 International Journal of Commerce and Management Studies (IJCAMS)
Volume 5, Issue 2
ISSN 2456-3684

 To analyse the impact of COVID 19 movement of goods. International remittances too

pandemic on various sectors have been affected and have reduced.
 To a analyse the impact of COVID 19 However, there are also a few areas that are seeing an
pandemic on payment categories uptick in digital payments by way of increased
 To make suggestions for better digital adoption during the lockdown. These include online
payment services. grocery stores, online pharmacies, OTT players
(telecom and media), Ed Techs, online gaming,
DIGITAL PAYMENT recharges and utility/bill payments. Digital payment
volumes are also receiving a boost through the
Digital payment is an convenient mode to make
transactions through online. It is a way of payment Government, which has pledged monetary assistance

which is made through digital mode. All the to the poor via direct transfers to bank accounts .The

transactions are done through online. We are all live in finance minister and the CEO of the National

the era of digitalization, there are many modern Payments Corporation of India urged people to

payment instrument used by various financial increase the use of digital payments in order to make
payments contactless. Digital payments, once a
institutions for delivering transactions through online
convenience, have become a necessity in these times.
.Mobile wallet, credit card and debit card, Aadhar
With a majority of the sectors that contribute to digital
enabled payment system, USSD and UPI are the
important digital payment. payments still in a state of flux, it is still too early to
ascertain the long-term impact of COVID-19 on
IMPACT ON BUSINESS digital payments.

The COVID 19 pandemic are largely affected the

Indian economy, with manufacturing, auto, retail, IMPACT ON DIFFERENT SECTORS
aviation and hospitality bearing the brunt of the
lockdown. This in turn has affected fast-growing
Payment players will be impacted differently,
digital payments which are closely linked to the
depending upon their exposure to various sectors. This
aforementioned sectors. Shut shops, travel bans and
view has been taken keeping in mind a timeframe of at
reduced discretionary spends by consumers (on dining
least six months for these sectors, depending on
out, movies and entertainment and so on) are further
how/when the pandemic is affected:
negatively impacting digital payments .Digital
payment volume declines are seen in airlines, tourism,
hospitality, hotels, entertainment, e-commerce (non-
essentials) and restaurants, among other sectors
.Further, cross-border payments, be they B2B or C2B,
have significantly declined owing to the temporary
shutting down of borders further, resulting in restricted
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 International Journal of Commerce and Management Studies (IJCAMS)
Volume 5, Issue 2
ISSN 2456-3684

Table 1: Impact of COVID 19 on different sectors

Sectors Impact (Remarks)

Aviation An acquirer with large exposure to the aviation industry is at risk due to the
threat posed by increased refunds and charge backs as flights are cancelled
across the board.

Tourism and hospitality Acquirers having large exposure to the hospitality industry will face
headwinds as complete the lockdown restricts business to a very large extent.

Electronics and consumer Volumes of payment companies having clients in the electronics and
durables consumer durables segment will take a hit owing to the disruption in supply
chains, delivery and demand.

Hotels and restaurants The lockdown has caused severe loss of business for restaurants and hotels.
The restrictions on travel have hampered the peak season for many. This in
turn will have an adverse impact on payment volumes.

Physical retail (non-essential) Non-essential physical retail has also taken a hit as forced closure has resulted
in loss of business. Payment companies will see a marked decline in these
transactions.

E-commerce (non-essentials) Non-essential e-commerce businesses will be adversely affected as they

prioritise essentials given the limited delivery bandwidth due to the lockdown.

Small and medium businesses Players with exposure to SMB and capital loans will be negatively impacted
and capital loans as working capital dries up for many players owing to temporary closure of
businesses, impacting repayments and increasing the possibility of non-
performing assets (NPAs).

Cross-borderpayments Payment companies with large cross border transactions will be impacted as
supply-side uncertainties, factory closures and trade barriers are affecting
cross border trade.

Internationalremittances International remittances will decrease as wages of Indians abroad would be

negatively affected.
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 International Journal of Commerce and Management Studies (IJCAMS)
Volume 5, Issue 2
ISSN 2456-3684

Payment fees – card schemes Major card schemes have delayed the roll-out of their new interchange fee
structure. Sectors like real estate and auto would see rate decreases, while
growth sectors like e-commerce and mobile ordering would see a hike in fees.
Overall network fees would decrease for card schemes.

Physical retail (essentials) With concerns of transmission of the virus through the exchange of physical
currency, digital payments at local grocery stores have increased. Payment
players having exposure to this category stand to gain.

Telecom Telecom companies will also see an increase in transactions as payments and
recharges shift to digital channels. Further, the boost in demand for broadband
internet services will also fuel the rise in transactions.

Insurance Owing to the COVID-19 pandemic, insurers have seen a rise in digital
payments as new and renewal policy payments are made online.

EdTech The lockdown and shutdown of schools and educational institutions have
proved to be a boon for EdTech companies, with an increase in demand for
their services enabled by online payments.

Domestic remittances The lockdown has caused severe loss of business for restaurants and hotels.
The restrictions on travel have hampered the peak season for many. This in
turn will have an adverse impact on payment volumes.

Healthcare/pharma Payment players associated with the healthcare/pharma sector will see an
increase in digital payments due to the COVID-19 pandemic.

E-commerce (essentials) Players catering to online selling of essential items have seen a surge in
transactions due to the lockdown. Payment processors having exposure to
such retailers stand to gain in relative terms considering the current situation.

Government Payments involving the Government(s) would increase on two counts: firstly,
the financial aid provided by the Government via Direct Benefit Transfer
(DBT) (G2P); and secondly, donations made to Government funds like PM
CARES and PMNRF. P2G would contribute to an increase in digital
transactions.
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 International Journal of Commerce and Management Studies (IJCAMS)
Volume 5, Issue 2
ISSN 2456-3684

IMPACT ON PAYMENT CATEGORIES

Payment systems have demonstrated that they are dependable and durable, and continue to command a high level of
confidence from the general population. However, closure of businesses and the lockdown have resulted in lower
transaction volumes overall. In this section, we look at the relative impact of the COVID-19 pandemic on various
payment categories.

Table 1: Impact of COVID 19 on different sectors

Payment category Impact (Remarks)

Cards Concerns over transmission of the virus through the

exchange of physical currency will boost online card
transactions.

Wallets Wallets will also see increased traction for P2P transfers,
bill payments and P2M payments for essential services
Issuance owing to the lockdown and aversion to exchanging cash.
However, some wallet players have increased their fees for
merchants and consumers, leading to merchants not
accepting their wallets for transactions.

Bank accounts Fund transfers to/from bank accounts will likely see an
uptick as people substitute cash with digital transfers.

ATM Transactions at ATMs will decrease as a result of the

lockdown being enforced. Not much cash will be required
compared to earlier.

PoS PoS terminals at stores selling essential items will see an

uptick in transactions, while those at most other
Acquiring
establishments will see a decline.

Payment gateways Payment gateways will see an increase in volumes as

transactions go online. They can also tie up with small
stores selling essentials who are currently seeking to
establish an online presence.

UPI UPI is primarily driven by P2P and P2M payment

transactions. With fears of virus transmission through cash,
Payment infrastructure
P2M UPI transactions for essential services (including QR
based payments) will see an increase.
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Volume 5, Issue 2
ISSN 2456-3684

IMPS The IMPS facility will see relatively increased activity as

fund transfers shift to digital means.

BBPS With no physical avenues to pay bills, people are adopting

BBPS, leading to a relatively higher number of
transactions.

NETC The NETC programme, which facilitates FASTag toll

payments, will be adversely affected due to restrictions on
travelling.

SUGGESTIONS FOR BETTER digital payments, it has achieved around 82 percent of

its set target, or around 410 crore transactions. In
DIGITAL PAYMENT SERVICES
absolute numbers, the government had allocated the
DURING COVID19
highest number of digital payments target to State
Bank take actions to:
Bank of India and Paytm Payments Bank.
 Scale up digitalization initiatives
 Upgrade infrastructure to support growth in digital
payments.
CONCLUSION
 Open data access and leverage analytics to design
personalized offerings. During the lockdown, the frequency as well as the
 Step up cyber security, cyber surveillance, and total monetary value of transactions, has declined.
financial crime controls. However, with people only buying necessary goods
and more goods in one go, the value per transaction is
CURRENT SCENARIO increasing, and people are increasingly relying on
digital platforms: in 2019, digital payment adoption
Banks have achieved more than 4,500 crore digital
was slow and varied significantly by country. Reasons
transactions for the year 2019-20, exceeding its target
included cultural, demographic and technological –
of 4,019 crore by 12 percent, said the government in a
many of which were a function of economies being at
letter addressed to top executives of 56 public and
different stages of development. But now digital
private sector lenders. Digital payments major Paytm
payment adoption are more fast in various country. In
Payments Bank has scored 65 in the scorecard with a
the context of COVID19, digital payment are more
ranking of 17 as per Meity report card. While the bank
useful to customers for their transactions by using
has achieved a 100 percent target in terms of PoS
different modes of online payment.
deployment, it has reported 79 percent of the
merchants as active in the urban areas. In terms of
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Volume 5, Issue 2
ISSN 2456-3684

 Shamsher Singh and Ravish Rana”study of

consumer perception of digital payment

mode”,journal of internet banking and

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