5As Model for Adoption of Digital Payments

5As Model for Adoption of Digital Payments

A cash-less economy might sound like an impossibility, but a less-cash economy is a definite desirable. Reduction of cash in transactions improves transparency, curbs antisocial activities and improves tax collection. India’s population demographic can become a boon or a bane depending on employment opportunities created over next 2 decades. For this we as a nation mostly rely on external capital ignoring our internal culture of savings. Though Indian households have a very high domestic saving but it remains in cash or gets converted into unproductive assets like precious metal or real estate purchased with cash. A decreasing share of cash in GDP would unlock tremendous productive capital for investment in the economy & job creation.

Digital payment here includes all electronic modes of payment that do not involve cash like debit/credit cards, prepaid cards, imps, payment wallets, AEPS, UPI, etc. Many researches and ideas are being floated to make this transition smoother and faster. The government has also taken many initiatives which have contributed to adoption. But most of the penetration is limited to urban areas and levels there too are far from satisfactory. To keep the momentum going and take new initiatives it is important to be able to measure and correctly identify the bottlenecks. To solve this challenge, we at TKWs Institute of Banking & Finance, have conceptualised the 5 A’s Model of Adoption of Digital Payments.

The model is based on a hypothesis that an individual’s adoption of digital payment goes through 5 steps. As the initiatives by government and private players increase people transition, from one level to the next, leading to increased adoption. The very first phase in adoption of digital payments is –

AWARENESS – The journey to adopting digital payments starts with awareness. The two key measures of awareness are reach and degree. In 2016, the awareness-reach surged due to word of mouth triggered by sudden shock of demonetisation. But the degree of awareness was limited and therefore the increased usage subdued after remonetisation.

The annual consumer survey by TKWsIBF students of Delhi’s affluent urbanites shows that more than 99% people are aware about digital payments but only 48% understand it well. 

AVAILABILITY – Just knowing little or a lot about digital payments does not impact spending behaviour. The choice of mode depends on ease of availability of options at the time of making a payment. In times, when we have 44 pre-paid instruments and mobile wallets, 8 authorised payment banks, plethora of debit/credit cards and Rupay, availability of choices is unlimited.

TKWsIBF survey of people ‘outside homes’ showed that only 3% respondents did not possess any digital payment alternative at that moment. Contrary to our belief more people had debit cards than mobile wallet.

Screenshot 2019-03-18 at 11.04.33 AM

ACCESS – What good is awareness and multiple alternatives if there is no point of purchase accepting it. Access can be measured by number of merchants who are accepting multiple modes of payment. In a country with over 15 million retail outlets, less than a million have electronic payment acceptance devices. Many merchants discourage the use of electronic payment because of high transaction fees.

According to TKWsIBF consumer survey, only 3% respondents in Delhi see 100% acceptance by merchants. Most find this as the major bottleneck that limits thier digital spending.  

ADVANTAGE – There must be some motivation for people to change their habits & behaviours. For digital payment adoption, providers offer extrinsic motivators like cash back, discounts & offers. But perception of benefits differs amongst people. In a culture of high tax evasion, the opportunity of tax outweighs the incentive of cash back. Moreover, the model of giving free cash for payment is not perpetually sustainable. Therefore, there is a need to segment consumer groups and focus on intrinsic motivators like convenience, availability & safety.

In the consumer survey by TKWsIBF students, 70% Delhities found ease of tracking transactions or convenience to be the biggest advantage of using digital payments against only 20% respondents who chose offers and discounts.

ASSURANCE – Given a consumer who is aware and has a digital payment mode that merchant is willing to accept, and the payer sees enough advantage, the decision to use it would still depend on feeling of safety and assurance. Most of the digital payment decisions are abandoned at this stage in consumer’s mind. The problem is amplified when consumers learn about frauds but don’t understand there causes. The perception of safety is an outcome of understanding possible threats and knowing the precautions that one should take.

TKWsIBF consumer survey in Delhi reflects lack of technological knowledge as the biggest fear amongst respondents when making payment.

The first step to solving a problem is knowing it. 5As model offers this solution by highlighting bottleneck in adoption process for different consumer segments in different buying situations. Knowing these challenges can lead to innovative ideas and solutions which will improve adoption of digital payments by different consumer groups for different products.

The 5As model is a result of multiple primary researches conducted in 2018 in Delhi NCR covering over 5000 respondents. The students across all batches of TKWs Institute of Banking & Finance undertake a major consumer behaviour research for financial services every year. The institute will be happy to collaborate with companies to research and study consumer group specific challenges. You can reach out to us at academics@instituteofbanking.org