Taking On India’s Payments Opportunity

With a massive population, economic growth and business-friendly regulations, India holds plenty of potential for business. But the country is experiencing serious shifts – PYMNTS research shows that 83 percent of consumers still use cash for online purchases, but card use has grown by 20 percent over each of the past three years. Find more insights, including more than 600 data points, along with a conversation with Amrish Rau, CEO of PayU India, inside the Doing Business In India report.

India is a huge market with increasingly high mobile penetration, which can be music to a digital payments player’s ears. While the payments and commerce space in India may be full of opportunity, Amrish Rau, CEO of PayU India, explained to Karen Webster that there are a few things to keep in mind when it comes to making digital payments stick in India’s ecosystem.

It’s been estimated that India’s digital payment market could reach $500 billion and could contribute as much as 15 percent to the country’s GDP by the year 2020.

That’s 10 times the current size of the market and a huge opportunity for those looking to enter India’s payment space.

While India has gained the attention of many companies looking to expand within its borders, these new entrants may not be aware of the challenges that may lie in trying to fuel the growth of the country’s digital payments market.

As Rau pointed out, while India does have increased smartphone adoption, new entrants offering payment services and a readiness on the part of consumers to embrace digital payments, the country is still holding strong to being quite cash-centric.

In fact, Rau confirmed that total digital payments today in India are only at 3 percent, while the remaining 97 percent of all transactions still happen with cash. With such a high affinity for cash, despite a growing interest in online purchases, the road to increased usage of digital payments in India won’t happen overnight.

But the growing shift toward digital payments is there, which is why there’s a few things to keep top of mind when pursuing the digital payments play in India.

Don’t Underestimate The Opportunity

India may not be a digital payment utopia just yet, but the country offers some unique characteristics that could one day set the stage for a digital payments revolution.

The first and probably most notable is how strongly the Indian market has adopted smartphones and mobile devices.

According to Rau, 50 percent of all of the payment transactions that PayU processes in the country are coming in on mobile. A key driver of this, he explained, is that many people use their mobile devices to surf and search online, which quickly led to those devices being used for purchases and payment transactions as well.

Mobile has helped to bridge the divide between those living in urban areas and more rural areas outside of the major cities — enabling access to products and services via mobile that would otherwise have only been available to rural customers if they traveled to bigger cities to make their purchases.

Debit cards also make up a significant chunk of the payments mix in India, with nearly 600 million debit cards in circulation. But there’s a stark difference between the number of debit cards and credit cards with only about 13 million credit cards in the market.

But Rau said that being able to adopt a model and build a business around debit-based transactions is something that is extremely unique.

Finally, while India may be considered an emerging market, it is actually one of the most advanced (outside of China) when it comes to payment transactions and addressing merchant needs and requirements for digital payments, Rau added.

New entrants in India’s market must understand that, although it is emerging, it’s actually quite mature from the payments perspective.

“As the market has gone into mobility and various different form factors in terms of transactions, it has become an extremely mature market, and the entry barriers for players for payments and accepting payment transactions are quite high,” Rau said.

India’s Digital Payments Revolution

With such high mobile penetration in India, there’s a significant opportunity to reinvent how consumers and businesses interact face-to-face with mobile and digital payment methods.

One of the suggestions has been that the country could transform the POS experience in the physical store by leapfrogging the use of traditional payment terminals at the countertop and the use of payment cards — essentially going from being a cash-centric market to mobile payments-centric.

“It will happen,” Rau made clear. “But having said that, I want to be the first one to turn around and say that it will be the second stage of the evolution. The first stage is going to be around how people adopt the internet and accept internet payments.”

Before cards and terminals can be replaced for in-store transactions, first, consumers in India will have to get more comfortable with making digital purchases on the internet.

In Rau’s opinion, this will happen because payments tend to follow the business.

If India can embrace internet payments and purchases, then digital transactions will naturally follow.

“The acceptance of digital payment is, right now, mirroring or following the acceptance of internet purchases,” Rau explained. “The adoption of internet purchases is really the first piece, and internet payments following it is going to be very critical.”

The usage of internet purchases in India is growing at a good pace as consumers realize they can prepay for a purchase with a digital form factor and don’t need to wait for a courier, he added.

As the payments market shifts in India, PayU plans to support a new environment for digital payment by not only being the payment platform of choice for emerging startups but, more generally, being seen as a full-service payments provider for the entire Indian market.

But Rau said the company has seen that there is still a great deal of education required on the merchant side about consumer digital payments — from securing the payments to ensuring that the risk policies are strong and in place for the platforms being built.

For the last 12 months, PayU has run educational programs across different cities to support and educate merchants as they move toward digital payment acceptance and provide a new comfort level with digital payments.

While changing consumer behavior can be more of a challenge, Rau said that they hope to leverage the customers painstakingly acquired by merchants and make them come on board the digital payments landscape by ensuring the comforts of the merchants.

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About The Report

The Doing Business In Report, a and PayU collaboration, focuses on the state of business — and doing business — around the world and what’s coming down the road ahead. Proprietary data analysis focuses on the past, present and future of nations on the rise in the world of payments.



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Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

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