India’s digital payments ecosystem is gearing up to offer contactless payments for commuters as metro and local rail services reopen in phases across the country.
Top digital payment companies, payment gateways, device manufacturers and banks are seeking partnership opportunities to scale and testing new contactless technologies to offer such services and gain share in the massive public transit market.
Industry sources said leading Unified Payments Interface (UPI) applications such as Paytm, PhonePe and Google Pay are ramping up the deployment of QR codes at ticketing counters, and working on upgrades to enhance the digital experience for commuters who make daily smart card recharges or purchase tokens, both online and offline.
“We see a great opportunity in enabling commuters to conveniently select source and destination while buying a QR ticket on their Paytm app that can also be scanned at the entry and exit points of the metro stations,” said a Paytm spokesperson.
“We work with all major Metros – Delhi, Mumbai, Hyderabad, Bengaluru, Chennai and Jaipur,” the spokesperson added.
The Noida-based fintech firm is offering services such as metro card recharges, QR ticketing at counters and payment gateway solutions. Additionally, commuters can also view the schedule of trains on the Paytm app.
Walmart-owned PhonePe, another leading digital payments firm with a sizable presence, has introduced new flows on its ‘Switch’ platform for enhanced ticketing experience while offering contactless service.
“With the opening of the Delhi Metro, we are expecting a significant uptick among consumers opting for digital payment modes and we expect smart card usage to increase,” said Karthik Raghupathy, VP – Strategy and Business Development, PhonePe.
“We believe a massive opportunity exists here, since the need of the hour is to enable a contactless journey for a commuter. Using cash as a payment mode always involves contact, and is inherently risky during these times,” Raghupathy added.
Metro services resumed in select cities on Monday for asymptomatic people from non-containment zones.
Metro authorities of Delhi, Noida, Chennai, Kochi, Bengaluru, Mumbai Line-1, Jaipur, Hyderabad, Maha Metro (Nagpur), Kolkata, Gujarat and Uttar Pradesh have prepared standard operating procedures with phased reopening of services.
The government has discouraged the use of cash transactions and tokens. Regulated frequency of trains to avoid crowding and increased stoppage time at stations have also been put in place to ensure social distancing while onboarding and deboarding passengers.
While UPI companies are leading the charge in ensuring contactless ticketing experiences, ET has reliably learnt that two top private sector banks along with leading card schemes are also piloting contactless acceptance solutions along with metro authorities of Bengaluru, Kochi and Ahmedabad.
“Pilots are ongoing for tokenized card payments directly using debit and credit cards at entry terminals of select metro stations,” said a banker requesting anonymity. “We are also testing a smartphone-based tap-and-go solution with select payment applications.”
However, there are challenges in the mass deployment of such bank-led solutions in the absence of remunerative business models, as the technology is expensive, said experts.
As per rules introduced earlier this year, banks cannot charge merchants any fees, called the Merchant Discount Rate (MDR), for processing digital payments.
“The tests have scaled, and the results are encouraging. However, the challenge would be mass deployment and agreeing on an interoperable framework among the banks. In the absence of a fee-based incentive for banks, scaling of such infrastructure could present a challenge,” the CEO of a digital payments company said.
Industry observers have also forecast another challenge – an increase in customer frauds on account of increased transactions.
While contactless payments on UPI follow a strict two-factor authentication mode, those through debit and credit cards don’t require any additional PIN authentications for payments up to Rs 2,000.
“Educating users about the benefits of online payments will be critical here. This will enable a shift in consumer behaviour towards adopting contactless, online payments,” Raghupathy of PhonePe said.
The UPI channel, which is operated by the National Payments Corporation of India, processed over 1.6 billion transactions worth nearly Rs 3 lakh crore in August, smashing all previous records amid an increased push towards contactless payment modes, even as overall retail spends in the economy remains subdued.
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