Covid-19, which has been ravaging the global economy and financial markets since 2019, is still on the roll. Governments and the corporate sector introduced various measures impacting various sectors to stem the economic disruption. Digital Payment was one of the sectors that went through colossal change, profoundly stimulating the financial situation positively for all stakeholders.

This was when a substantial number of people globally tried the new forms of payments for the first time. According to the World Payments Report by Capgemini, 41% explored contactless cards, 35% added a card to a digital wallet, and 27% tried QR code payments.

What statistics suggest

The Pandemic accelerated the adoption of digital payments, as noted by the Reserve Bank of India in its Annual Report 2020-21. The digital transaction volume in 2020-21 was 43.71 billion, compared to 34.12 billion in 2019, underlining the spike. The National Payments Corporation of India (NPCI), which administers UPI, recorded a threefold increase during the fiscal year 2020-21 in terms of the number of UPI transactions and the value.

How financial institutions helped deal with conditions induced by the Pandemic

Banks and financial institutions handled the burgeoning demand for digital payments with innovative offerings like QR code payments, reducing visits to bank branches. They overcame the challenges of digital payments:


QR code payments

Since the Covid-19 Pandemic started, people have used the QR (Quick Response) code extensively to make payments. When you scan a QR code, the app on your smartphone decodes the horizontal and vertical patterns of the matrix and transforms them into an array of characters. In line with the command on the QR code, the phone may confirm the payment information, verify geo-location, open a browser link, or perform other operations.


Online KYC

Restrictions during the Pandemic prevented the customers from reaching banks and completing required formalities. Banks adopted online KYC to enable customers to complete the formalities from their homes within a few minutes. The process involves verifying customers' KYC documents and recording their signatures via video call with a bank official, thus eliminating any need to visit a bank branch physically.

Online Banking

Introducing all-encompassing online & mobile banking

During the Pandemic, banks focused on developing all-encompassing, powerful apps and mobile banking applications, enabling customers to complete all the processes they would have otherwise needed to visit the branch. These included functions such as fund transfer, applying for credit, changing address, and the like.


Direct Benefit Transfer (DBT)

The Direct Benefit Transfer (DBT) system proved to be very efficient in helping people at the lower strata of the society tide over the health and economic crises prevailing in the world. Without funds in their bank accounts, survival simply won't have been possible for them. Though the Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched way back in 2014 to provide universal access to banking services, the accounts opened came in handy during the Pandemic.

How Pandemic influenced various payment categories

The answer to the quest by banks to shift to low operating costs from a capital-intensive approach lies in the service models which the cloud offers. However, business needs must be matched to the right cloud service model:



Apprehensions regarding the transmission of the virus via the exchange of currency notes have boosted transactions through cards, wallets, and bank accounts. Usage of cards in ATMs went down, but online card transactions saw a hike. Wallet transactions are reflected in a higher volume of P2P transfers, P2M payments for essential services, and bill payments. Fund transfers to/from bank accounts will see an increase as well.



ATM transactions went down, mainly because the people were afraid of getting infected via the kiosk. As for POS, stores dealing in essential items witnessed a hike in transactions, but the shutdowns forced a decline in most other establishments. Payment stores tied up with small stores selling essentials, resulting in an uptick in volumes of transactions. These transactions are throttled by P2P and P2M payment transactions regarding UPI. P2M UPI transaction volumes for essential services saw a jump as people were afraid of using cash.


Payment Infrastructure

As people adopted digital means, the IMPS (Immediate Payment Service) facility saw an increase in activity. Spurred by the absence of physical avenues for bill payment, the adoption of integrated bill payment systems went on the rise, enabling multiple payment modes, facilitating payments through a network of agents, and ensuring instant payment confirmation. However, the programs that enable transactions like toll payments got adversely affected due to pandemic-related restrictions.

Short-term measures taken from a payments perspective

Governments, regulators, and banks worked in tandem to encourage digital payments while discouraging cash exchange. Steps taken included:

  • Waiver of fund transfer charges on various digital platforms
  • A few months’ moratoria on repayment of loans and credit card dues
  • Fast-tracking of the onboarding process on UPI or UPI-PR, making it completely contactless and online
  • Government using a digital pipeline for direct transfer of bank accounts

How Pandemic has impacted customer life on getting accustomed to digital life

The three most common methods in which service providers deploy cloud for banks are:

• Financial Behavior
A big bottleneck in the adoption of digital transactions was the users’ lack of trust. During the Pandemic, though, there was a greater challenge before people as they were struggling for survival, the stuff as basic as food and medicine. The immediate necessity got better of their misgivings regarding digital payments. As it turned out, a significant chunk of adopters continued with digital payments even when Covid waves had subsided.

• Financial Education
To reduce physical contact during payments, efforts were made by the governments and companies to educate customers. For example, customers were encouraged to insert the card into the POS machine themselves rather than hand it over to the person handling the counter. To execute payments below a certain threshold, they could use the contactless feature on the plastic.

• Shift to High-Volume, Low-Value Transactions
Prior to COVID-19, low-volume high-cost transactions were the norm in digital payments. During the Pandemic, customers tilt gradually moved to high-volume but low-value transactions, resulting in lesser use of cash. Stuff like wearables also promoted digital payments and made them part and parcel of daily life.

How the changes in the payment industry worked out

The three most common methods in which service providers deploy cloud for banks are:

Collection of Online Payment – The adverse impact of the economic slowdown was less severe on the companies with a robust online presence. Businesses with no or limited online presence suffered the most. Only those businesses that tied up with payment specialists in time could survive the Pandemic. Various payment service providers offered pricing discounts to businesses to encourage them to adopt online payment collection services.

Revamping of Process – The Pandemic led to the total overhaul of the touchpoint experience as social distancing norms had to be followed along with the regulations. Financial institutions offered loans and credit cards in absence of in-personal contact, thanks to processes like video KYC. Amidst the Pandemic, the regulatory approval for such processes came fast. Issuance of virtual cards also picked pace.

Refurbishment of Payment Processors – Owing to the rapid increase in the volume of digital transactions, payment processors worked on improving their service quality and capacity. The push for growth mainly came from industries witnessing a quick adoption rate. Such industries included EdTech, Telemedicine, Pharma, and Essentials Retails. The focus was on omnichannel payment services. As more players moved to digital payment platforms, the quality of experience got an uptick.

Thrust on Productivity – As the economic activity began to resume after the shutdown amidst restrictions, companies leveraged technology to re-equip their workforce. For instance, relationship managers with enterprises were equipped with street selling kits. Technologies like video conferencing, remote desktop connection and cloud storage were also proven to be quite useful in work from home scenarios.

Fighting Fraud – With fraudsters attempting to use the surge in online transactions to steal money from unsuspecting users, businesses had to take preventive steps. These included more risk monitoring, usage of business intelligence tools, and beefing up prevalent systems. Such steps did help to keep the thieves at bay and overall retain the trust of the end users.

How Modefin products helped transformation in the digital space during the Pandemic

Omni-channel banking solutions that Modefin rolls out enable banks to offer an end-to-end digital banking experience to their customers without going through the painstaking process of picking from multiple providers. The scalable design drives customer engagement across various delivery channels such as Web, Wallet, ATM, POS, In-store, or Doorstep.

Modefin offers an impressively diverse product line, including Mobile Wallet, Mobile Banking, Internet Banking, Social Banking, Micro Savings & Lending, POS Lending, Group Savings & Lending, Conversational Banking, API Manager, Loyalty & Rewards Management, Children Banking, Merchant Solution, In-Store Banking, SME Banking, Doorstep Banking, and Personal Finance Management. Usage of AI-driven analytics and machine learning algorithms takes the efficacy of products to another level. The Modefin Digital Onboarding solution employs cutting-edge technology and industry-standard process to deliver a seamless onboarding experience. It possesses the AI@Core model that simplifies the customer journey while reducing the chance of fraud.

The way ahead

With more COVID-19 waves in the offing and further advancements in analytics using AI and ML, more banking interactions are set to go the digital way. Sophisticated analytics will provide them unique, previously unavailable insights, providing banks with intelligent recommendations and alternative solutions to win customers and retain them. Drop rates for ongoing onboarding attempts are also likely to go down.

To be successful, fintech requires a holistic digital payment experience for all. This is possible when financial institutions work closely with fintech to develop an inclusive ecosystem with an unprejudiced regulatory approach and supportive government policies. We look forward to seeing advanced fintech solutions that bring more end-users with an even better alacrity.