Easier norms for contactless use may boost cards

MUMBAI: The Reserve Bank of India’s decision to hike the limit on contactless payments without entering a PIN to Rs 5,000 from Rs 2,000 earlier is expected to level the playing field in favour of cards. The development comes at a time when QR (quick response) code transactions are seeing runaway growth.

In India, QR code-based payments have been increasing on the back of the Unified Payments Interface (UPI), which saw a record 2.2 billion transactions in November. Two key advantages for merchants in the use of QR codes is that they can start accepting payments without spending on point-of-sale (PoS) devices, and it is contactless — a key feature during the pandemic.

Although contactless or NFC (near field communication) -based cards were launched by Visa over five years ago, the pickup has been slow. Initially, there was a shortage of acceptance devices, which has now been covered with over one million PoS machines having NFC capability.

According to payments infrastructure firm Pine Labs CEO Amrish Rau, the share of contactless in its total transactions has increased from 2% in January 2019 to over 12% in October 2020. “All our terminals are now accepting contactless,” said Rau.

Besides providing merchants with the PoS machines, Pine Labs is also making available to merchants a mobile application that allows shopkeepers to use any NFC-enabled smartphone to receive contactless card payments. Rau points out that given that average card transactions on their platform is Rs 2,800, the Rs 5,000 limit covers most use cases.

According to Mastercard vice-president Vikas Sarogi, the exponential growth in the last few months is because of a shift to a hygienic way to pay and the increase in limits will hasten the cash-to-digital shift.

Payments networks are extremely bullish about contactless transactions as the general public has now overcome fears stoked by social media rumours on how ‘Wi-Fi’ payments can be compromised. Payments experts say that the incidence of fraud on NFC cards is lower. Visa now sees 44% of its transactions in the Asia-Pacific region through contactless cards.

“As evident in recent months, there is strong consumer preference for digital payments and the new enhanced limits for e-mandates and contactless cards will help transition millions of Indian consumers from cash to fast, convenient and secure forms of digital payments, “said T R Ramachandran, group country manager at Visa India.

The National Payments Corporation of India (NPCI), which has launched UPI, is also bullish on contactless transactions. A little known fact is that the NPCI is the largest card issuer in India. It also issued contactless cards. Even the old-generation cards without NFC can be used for contactless payments by dematerialising them and using them through a mobile application.

Many smartwatches are enabled for NFC payments. SBI recently tied up with Titan to enable contactless payments through their smartwatch. According to NPCI’s MD & CEO Dilip Asbe, the RBI decision to enhance the limit for contactless is a major positive for RuPay cards.