Payments industry must continue evolving and innovating

Since the beginning of 2021, the world has been experiencing another deadly wave of the Covid-19 pandemic. In South Asia, infection rates have increased, and death rates are higher than in the first wave in 2020. Even as the drive to vaccinate has accelerated, several countries have been forced to opt for lockdowns and announce strict containment measures.

Bangladesh is the third most affected country in South Asia, after India and Pakistan. According to ReliefWeb, the largest humanitarian information portal, Bangladesh is recording almost 50 per cent more deaths per day than its previous peak in June 2020. As the situation worsened, the country went into a strict lockdown for the second time since March 2020.

The pandemic has changed many things in our day-to-day life, the way we live, shop or commute, and has brought about changes in the behaviour that was earlier unthinkable. These changes in our work and personal lives will not roll back even when the severity of the pandemic subsides, or treatments render it less dangerous.

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

One of the key positive changes during the pandemic was the acceleration in technology adoption across the country. The pandemic alerted citizens to the vulnerability of cash and the resilience of digital payments. Even with all the restrictions during the lockdown, commerce needed to keep flowing to fulfil basic needs.

Digital technologies enabled essential commerce and consumers swiftly switched to digital modes of payments. Today it is a strategic and operational priority for businesses across categories ranging from grocery stores to lifestyle shopping, food deliveries and pharmacies.

Though the shift to digital payments is not new, it has accelerated rapidly over the last year. Today, people realise how the "touch-free" aspect of contactless and digital payments can deliver personal safety benefits amidst social distancing and heightened concern for health protection.

Last year, the World Health Organisation also advised consumers to switch to contactless payments and avoid handling cash to prevent the spread of Covid-19.

As per a Mastercard study, 79 per cent of people globally and 91 per cent in the Asia Pacific are saying that they will opt for tap-and-go payments as they enable transactions without the need to touch a point of sale (POS) terminal or pass the card to another person. Alternative payments methods such as mobile payments have grown, while cards retained their strong incumbent position supporting e-commerce and POS transactions.

Digital payments for e-commerce and contactless transactions are truly essential to building a resilient business and earning customer loyalty, now and in the future.  

The payments industry is relentlessly focussed on innovation to introduce improved products and services for consumers, providing them with a simple, safe and seamless shopping experience, with the security of transactions being of utmost importance. The growth of digital commerce in the last year led to a greater risk of cyber-attacks and payments frauds, and this must be addressed.  

Newcomers, who are not digital natives, are more at risk. To ensure a safe and secured payments system, all the players in the ecosystem must come forward to exchange knowledge and intelligence. Some modern technologies such as biometric authentication and artificial intelligence can effectively help us detect threats like payments fraud.

Due to the rapid migration to digitalisation, specialised and authentic business data is now available and can be applied to get business and consumer insights critical to recovery and growth. It can help companies reform and adopt relevant go-to-market strategies by delivering necessary insights.

By creating a unique digital identity for every customer, companies can easily provide a more engaging and personal experience and improve security efficiency.

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 compromising safety and security.

We have seen digital payments in e-commerce double in Bangladesh from 15 per cent before the pandemic to 35 per cent now. There has been a surge in merchant categories like grocery, electronics, drugs and pharmacies, wallet loading, hotels and food delivery.

Now, it is time to allow a 5 per cent incentive by the government for digital modes of payments – 3 per cent to users and 2 per cent to the merchants for accepting digital payments. We recommend that this incentive is allowed for the next three years starting from the upcoming budget.

Debit cards should be allowed for contactless payments to ensure more frictionless payments. Credit card acquisition should be simplified, and traveller's quota should be increased to $25,000 per year.

These efforts will help the people of Bangladesh embrace the new normal and provide an impetus to the nation's goals for financial inclusion and fulfil the 'Digital Bangladesh' vision.

The author is country manager of Mastercard Bangladesh.