Contactless payments, i.e. cashless transactions that do not require cards to be swiped at Point-of-Sale (POS) terminals, grew by six times in the last three years in India led by adoption from cardholders and merchants alike.
The whitepaper by Visa and Worldline India says that the share of contactless transactions in overall face-to-face (F2F) transactions grew from around 2.5 percent in December 2018 to 16 percent in December 2021.
Contactless payments can be initiated through instruments such as credit and debit cards, key-fobs, smartphones, etc. Certain mobile devices can also initiate contactless transactions by using Near-Field Communication (NFC) technology, allowing contactless debit or credit credentials to communicate with NFC-enabled terminals at close range.
NFC also powers mobile wallet apps such as Apple Pay, Samsung Pay, and Google Pay on NFC-enabled Apple and Android smartphones.
The growth was also led by an overall resistance to contact-based payments due to the fear of Covid-19.
“Additionally, the adoption of EMV chip cards has been pivotal for the growth of contactless payments, aided by supportive regulations that increased the contactless limit in India to Rs. 5,000 in 2021,” the report said.
EMV stands for Europay, Mastercard and Visa, a standard for payments followed globally. EMV chip cards are commonly referred to as the smart chips in credit and debit cards that enable contactless payments.
The highest adoption of contactless payments was observed in sectors like Quick Service Restaurants, pharmacies, food, grocery, etc. across both credit and debit cards.
According to the whitepaper, while 25 percent of all transactions at supermarkets were contactless in January 2020, these transactions rose to 31 percent by January 2022.
Ramakrishnan Gopalan, Vice President, Head of Products and Solutions, for India and South Asia, Visa said “We have observed that the key drivers of contactless growth – availability, convenience, utility, and security – will continue to aid adoption at scale as contactless cards become ubiquitous.”
The user footprint across India also stepped up with metro cities leading the way. In 2020 and 2021, Delhi NCR, Karnataka, Gujarat, and Telangana had the highest proportion of contactless transactions and penetration, across both debit and credit cards.
Sunil Rongala, Senior Vice President of Strategy, Innovation and Analytics at Worldline India said, “As contactless payment methods have shifted from a choice to a necessity in recent times, backed with multiplying volumes of transactions in the last three years, we see immense potential in contactless further helping digitize the merchant ecosystem.”
“Coupled with the increasing merchant acceptance of contactless cards we are seeing not only in metro cities but in non-metro cities as well, we anticipate contactless payments to be a key driver of digital payments in the future,” he added.
Worldline India Digital Payments Report 2021 has shown that while cards contribute to 26 percent of all digital transactions, they generate 53 percent of the value of all digital commerce.
In FY22, the Unified Payments Interface (UPI) made up 60 percent of all retail digital transactions in India. However, UPI is the preferred choice for small value payments and other forms of payments and fund transfers lead in terms of transaction values.
