Digital Payments during COVID times

Digital Payments during COVID times

Published on :- February 15th, 2021

The COVID-19 Pandemic and consequent lockdowns have had a significant impact on the economy and patterns of spending in India. How did digital payments fare during this time?

Here is a quick look at the patterns of consumer spending via digital payment transactions from November 2019 to October 2020.[1]

There is clearly an observable ‘lockdown effect’. This takes the form of a dip in both volume and value of transactions[2], seen most sharply in April 2020, coinciding with initial lockdowns and severely curtailed economic activity during this period.

This lockdown effect only lasts for two months. By June, the levels are comparable to the levels they were at pre-COVID (and, in the case of retail transfers, above them). This is maintained until the end of the year.

A closer look at cards and prepaid Instruments, highlights this pattern.

Given the ubiquitous access to mobile and inexpensive data (covered in our previous story here), it is not surprising that the total mobile banking transactions have seen a great increase in both terms of volume and value, post the aforementioned lockdown effect.

The same holds true for the more ‘consumer-focused’[3] NPCI Platforms[4].

A closer look at these platforms reveal that United Payments Interface (UPI)[5] is the most popular platform and has seen a substantial increase following the lockdown effect.

The platform that seems to have benefited the most from the push towards digital, and accelerated by the authorities, is the NETC Fastag[6] platform, with over 250% increase in volume and comparable increase in value of transactions from the beginning to end of the time period being considered.

The notable exception to the lockdown effect was AePS.[7]. Aadhar Enabled Payment Service (AePS) was conceived as a significant tool for financial inclusion by empowering a bank customer to use Aadhar as their identity to access their respective Aadhar enabled bank account to perform basic banking transactions through a banking correspondent. This infrastructure has enabled banking access to scores of people during the lockdown and has achieved a significant growth in the subsequent months.

Thus, the data indicates that while there was a fall in both the volume and value of digital payments during initial lockdowns, there is a quick recovery and, in many cases, a substantial rise in the previous levels of usage due to continuing emphasis on precautionary social distancing. The pandemic has accelerated the growth of digital as a preferred channel for transacting, and the trend is likely to continue. The success of platforms like AePS proves that investment into digital financial systems can have a large social impact by facilitating financial inclusion. What it implies for the organisations working for social impact is that facilitating access and adoption of digital banking and payments - particularly the systems such as AePS - through boosting of awareness, training and availability needs to become a focus area for the financial inclusion ecosystem.


[1] Digital transactions themselves are defined as a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/ electronic modes wherein both the originator and the beneficiary use digital / electronic medium to send or receive money.”

[2] Here, CCIL refers to those systems maintained by the Clearing Corporation of India Ltd, which settles transactions in government securities, foreign exchange and money markets. Credit Transfers- Retail refers to credit transfers for the retail segment Debit transfers/Direct Debits are debit transfers. Prepaid Instruments (PPI) are methods that facilitate purchase of goods and services against the value stored on such instruments

[3] Out of the NPCI platforms, the following are being left out of this analysis: *99#, NACH, IMPS, CTS, NFS and Bharat BillPay and BHIM. The first is being left out due to the extremely small amounts of transactions that occur on this platform, NACH, IMPS, CTS because most of the transactions likely come from corporates, financial institutions, etc rather than average consumers, and the last due because of a lack of complete data. BHIM is excluded because it makes use of UPI, which is already being covered.

[4] Many of these platforms are included under Credit Transfers- Retail and Debit Transfers in in the initial graph

[5] UPI allows user to make use of several banking features in a single mobile application, even from multiple bank accounts.

[6] NETC Fastag is a nationwide digital toll payment solution

[7] AePS allows people to avail banking services through the use of Aadhar

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