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    Business Uncategorized

    Digital Payments in Tier 1 & Tier 2 Cities: The New Way to Pay


    India’s suburban and rural population are rapidly adopting digital mechanisms of payment. During the COVID-19 crisis, it was seen that a large chunk of the population was successfully adapting to online payment methods.

    The wave began with the growing penetration by the government of micro-finance firms, large-scale Aadhar enrollment, Jan Dhan accounts, and direct subsidy credit into bank accounts. 

    Additionally, a second wind of increasing adoption of online payments across the Indian landscape is being driven by some key factors such as:

    • In India, e-commerce platforms now receive a large number of Tier 2 & 3 city sellers doing high volume transactions. 
    • The demonetization drive forced some degree of reluctant adoption, although the money economy is back with a bang, for some time this move exposed individuals to transacting without cash and create bank accounts that support online transactions 
    • Increase in mobile penetration with links to payment gateways as there is greater use of technology in today’s day and age
    • A substantial drop in data costs on mobile devices due to the advent of data moguls like JIO

    Since this environment creates compelling factors that deserve attention, the implications for traditional companies in the BFSI space are too important to ignore.

    Implications of Digital Access on the Payment Landscape

    So how does all of this affect the payments and collections landscape?

    The impracticality of ignoring Tier 2 & Tier 3 cities is well known, whether approached through the e-commerce lens or in terms of collections. The benefits of focusing on this segment work similarly in favor of businesses and their customers in the payment collection landscape.

    Firstly, principles will be now able to get their payments with little to no effort.  They also do away with reconciliation attempts because digital payments are tagged directly to accounts. 

    For consumers due to needless delays resulting from human mistakes such as misspelled or inadequately checked cheques and signatures, the benefits lie in decreased culpability.   

    In addition, safe payment gateways often go a long way in building trust and reducing levels of anxiety.

    ATS Services works with insurance and retail finance firms in the financial services market, where major contributions come from communities in smaller cities and towns. At present, online payments amount to 3-4 percent of the overall received payments. 

    However, these are rising, and even from a year ago, the movement in this space is important.

    Clearly, at this point, the question is not whether these changes would influence the landscape of payments and collections. The problem is how this effect will be influenced and how businesses in the BFSI space will take steps to prepare for it. 

    With a whole new wave of users ready to step into the fray, digital affinity and access are on the steady rise in Tier 2 & Tier 3 Indian cities. Companies need to encourage customers in smaller towns and cities to make easy payments.

    Companies may be left behind with an unsatisfied consumer base and low customer satisfaction unless a systematic plan to go digital in customer engagement with a focus on payment collections is carried out. 

    This is a field in which we have gained significant expertise over the last few years. If you want to hear more about how we can help your organization get started, email us.

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