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Monday, 13 April, 2020, 16 : 00 PM [IST]

Decline in e-commerce sales due to lockdown hits payment gateways

The ongoing lockdown has led to a decline in volumes for digital payment firms, as online services such as e-commerce, retail and travel remain mostly suspended, reports Tarush Bhalla in Mint. The uncertainty has made it difficult for firms to assess the impact on digital transactions in the near future.

“The immediate effect of the lockdown on online payments is negative. Most online services, including e-commerce, travel, are not working. Apparel, e-commerce, movie and entertainment bookings and home decor sales contribute to the largest share, forming 40% of the total digital payments universe. Also, small towns, where digital payments had started growing, will take a hit as people are likely to avoid any kind of discretionary spending,” said Sanjay Doshi, Partner and Head, KPMG India, a financial services advisory. 

With most e-commerce companies suspending delivery services, transactions for groceries and other essential items have shifted to local cash-based sources, he added.

Online payment gateways are also reporting a similar decline in payment volumes with Naspers-owned PayU witnessing a 30% drop and Bengaluru-based Instamojo witnessing a 40% drop in volumes in March.

“Payment gateways like ours also seem to be reporting 25-30% lower transactions than the daily baseline due to scarcity of supply considering the lockdown. But the real challenge is the ‘uncertainty’ around how long this situation will continue, which everyone in the digital payments industry is trying to make sense of,” said Harshil Mathur, Chief Executive and Co-founder, Razorpay.

Mathur said offline payments are suffering much more since there aren’t many physical transactions. Overall, the offline payment universe might be witnessing a drop of around 70% in payment volumes at the industry level.

This is also because retail stores, and food and beverages outlets, which contribute a lot to the offline payments space, continue to be shut.

With a decline in categories like travel and hospitality, payment categories like insurance, grocery, gaming, OTT and edutech are witnessing increased payment volumes. (Source: Mint)

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