Consumers choice behavior towards digital payments

Abstract

In India, the digital payment ecosystem received a boost, with the Demonetization announced in 2016, prompting the biggest ever shift from cash payments to digital payments. In the wake of demonetization, several payment gateways have popped up over the last 4 years, like UPI (United Payments Interface) such as BHIM (Bharat Interface for Money), G-Pay (formerly known as Tez), mobile wallets such as PayTm, MobiKwik etc., in addition to the already available net banking, debit/credit card system of payment. The onset of the corona pandemic in early 2020 has further triggered the shift to digital payments system to promote social distancing. This has opened opportunities and led to the emergence of newer revenue fields for digital and omni-channel providers. Smartphone penetration in India is currently 31.7%, with a projected CAGR of 13%, serving as a significant potential market base for digital payments (Asher, 2020). However, the current digital payment ecosystem stands at just over 7.5% (cumulative). A significant percentage of India’s population still prefers to transact in cash, especially in rural areas. As the digital payment ecosystem expands it is important to understand how a consumer chooses between different available options for payment gateways. While consumers show an overall increased willingness to adopt digi-payments, the choice of payment gateway is influenced by several factors such as ease of use, speed of transaction, data safety & security etc., This paper studies the various factors that influence a consumer’s choice of digital payment and lays out the critical factors that go into making the choice. Primary research through surveys, focus group discussions and direct interviews indicated that various internal and external factors affect consumers’ choice. There was little to no loyalty towards any app. Visual influence, peer influence, transaction size and app’s features like Ease of use, transaction experience, security pays a major role in consumers’ choice behaviour. Consumers unmet needs and perceived disadvantages in existing apps have been analysed, to provided recommendations for app makers to enhance user experience to survive in the highly commoditized payment apps market.