What’s Ailing India’s Digital Transactions Experience?

Come festival season and anyone and everyone turns into a compulsive shopper. Over the past few years this trend has taken a digital route whereby the ratio of digital payments has grown, albeit with a pain point of poor internet connectivity and failed transactions. A recent study suggests that a larger chunk of those who paid money online found the experience stressful due to the systemic friction.

The study conducted by YouGov and ACI Worldwide, says while 42% of the digital payment users preferred online due to the discounts, incentives and cashbacks, only 24% cited speed and frictionless transactions as their reason for inching towards digital payments. In other words, without enhanced focus on tackling India’s digital infrastructure, the rising online transactions may get stymied soon.

The Regular Shockers

While internet connectivity remains a key challenge for increased adoption of digital payments (a top concern for 44% of those surveyed in the report), this can only improve with network infrastructure upgrades. Other top concerns include failed transactions (36%), problems with processing refunds (32%) and fraud (29%). At the same time, one-fourth of the respondents blamed merchants on their lack of infrastructure to tackle the increasing online payment.

In fact, banks, fintechs and merchants should be aware that 40% also see data privacy as the top area of concern when it comes to digital payments. Needless to say, almost every user reports a bad experience with an ATM transaction, payment at a point of sale (PoS) machine or an online payment. This is especially true while withdrawing cash from an ATM that the message from the bank arrives on the phone that the money has been deducted from the account, but no cash comes out.

A frequent problem is that the website seeking an online payment freezes at the point when the server on the payment side was all set to send the request to the merchant website. There again, the money gets deducted and the heart stops when a message about the failed transaction arrives on the phone.

Now imagine this happening when one books an airline ticket for a few thousands and the money goes from your account but the airline calls back asking you to pay up! What more does one require for a panic attack?

The real surprise from the market research report came in the form of the 32% who said they hadn’t used cash for festival shopping, preferring online transactions instead. But if we wonder what makes UPI apps like Google Pay and Phone Pe give lucrative rewards, the figures quoted in the report suggest that the 42% users are encouraged by their discounts, incentives or cashbacks.

Where’s the Infrastructure?

According to an Akamai report, India is at the 105th position in the world in average internet speed. This ranks us amongst the lowest in the entire Asia-Pacific region. Mobile connectivity is yet to reach more than 50,000 villages, and fiber networks, which offer broadband connections, have only reached 56,000 of the 2.5 lakh gram panchayats targeted by the IT department.

The average page load time on a mobile connection in India is more than six seconds, further highlighting that the country continues to lack the infrastructure and capacity to handle such huge online traffic.

If this reminds you of the ever-increasing number of motor vehicles and the poor quality of roads, stay with the thought. Because that’s exactly what we seem to be building up to in the digital world too.

“A direct consequence of the slower-than-average internet speed is on transaction failure rates. India is home to some of the highest online transaction rate failures and the numbers have only risen ever since the demonetization drive began, believe experts. The increased load on online transactions, chiefly through digital wallets has led to more and more transaction failures,” said tax and financial consultant Partha Ray.

The Akamai report also states that India comes only second to the US, among top destinations for hacking attempts in the world. Each attack represented an attempt by a person or computer to log in to an account with a stolen or generated username and password, according to the new edition of its “State of the internet/security” report.

Soumen Kayal, an entrepreneur of a web development firm, believes that Paytm, one of India’s leading mobile wallets, has been facing regular outages and issues wherein people are not able to access their wallet balance or successfully complete transactions. The company has been blaming it on server outages and bank downtimes or other technical issues.

“The key issue here is that the government and the m-commerce companies are working on outdated models where capacity is increased after factor demand increase and not in foresight,” he says. Of course, the bigger challenge is infrastructure capacity, which seems continuously constrained given that the number of new users always outpaces growth in this area.

Best Practices Needed

Experts believe that user adoption must be achieved through better service and experience delivery. An example of a cashless society is Sweden, where 98% of the transactions are digital. The country made this move way back in the 1960s when employers and workers agreed to the digital transfer of payments and its biggest facilitator was their online infrastructure.

Another infrastructure challenge in India relates to inadequate data protection and privacy laws. India’s data protection law, inspired by the European Union’s General Data Protection Regulation (GDPR) is yet to come to force. But experts believe, it is unclear what could be a viable middle ground for India, which has neither the tight control of Europe nor the laissez faire of the US. With no stringent regulatory authority, there is very little that India is doing to protect its citizens from cybercrime.

The one thing which is constant throughout is the sheer lack of preparedness on part of the government to support a digital economy. This unpreparedness will be further exposed in the coming months, when even greater number of people come onboard the digital payments wave, unless organizations adopt strong regulatory measures.

In other words, the gap between Prime Minister Narendra Modi’s digital dream and its realization is widening by the day. As Daniel Markuson, Digital Privacy Expert at NordVPN says, updating a digital security system and making it immune to cyberattacks require millions of dollars and high-level skills.

“Slow internal processes and complicated procurement procedures add up to the reasons why some organizations are still using unsafe security software. However, data breaches are expensive, and the security of people’s sensitive data should be considered priceless,” he says.

A Silver Lining?

The millennials are increasing going cashless so there is no threat of a slowdown in digital payments, just as there was no auto sector slowdown because of bad roads. The ACI report says that 77% of millennials had used digital payments at least once during the festival season. As Kaushik Roy, Vice President & Country Leader, South Asia, ACI Worldwide commented, “With monthly transactions on the UPI platform nearing one billion, and credit and debit card usage at the POS experiencing double-digit annual growth, digital and card payments will continue to make inroads into the cash economy.”

Recently, RBI announced the setting-up an internal ombudsman for digital payment or mobile wallet service providers, including Paytm, PhonePe, Amazon Pay and others. It has also asked the large Pre-Paid Instrument (PPI) issuers to set up an internal ombudsman to address customers’ grievances. A report in the Financial Express report, RBI moved in this direction because it wanted to ensure that customer grievance is resolved in an effective manner and within a defined timeframe.

What’s the solution? Government needs to collaborate with the private sector to create better internet infrastructure, just as it did in the 1990s with privatizing the road network through toll roads.

(The article was first published on CXOToday.com)