Indian Consumers Seek Relief From Cross-Border Education, Travel Payments Friction

The great reopening is upon us: Travel is surging, airports are crowded and railways are congested. Cross-border travel is seeing a snapback.

Students are going back to school in person, shaking off the confines of virtual classrooms, and international students are finding their way into dorms and bursars’ offices.

Booking.com SVP Daniel Marovitz, Leap Finance Founder Arnav Kumar and Cashfree Payments Co-Founder Reeju Datta told PYMNTS’ Karen Webster that India spotlights the frictions of paying for it all as consumers physically move beyond their borders.

As eCommerce grows in that country across all manner of verticals, companies face the challenge of getting the payments mix right in a bid to increase conversion and capture more consumer spend. Simply put, the most “popular” payment methods are not the methods that consumers might prefer to use when they leave their home country.

Travel offers a microcosm of the challenges and opportunities. As Marovitz said, India was the third-largest source country for international travel pre-COVID.

“Travel is a fundamental instinct,” he said. “And India is waking up to that,” which in turn is driving a surge in online bookings — a surge that brings its own complexities. There’s a wide difference between the way travel had been planned and paid for in years past, with the process usually involving travel agents.

Today, consumers are mostly booking their travel online or though travel apps. Along the way, as they navigate restaurants and car rentals destinations, these consumers want the payments experience to be consistent. Many of the financial frictions still in place for international travel revolve around getting transactions done and grappling with cancellations and refunds.

Call it the “connected trip,” said Marovitz, as a trip can be simplified into a series of tabs in an app. The process itself is flexible enough so that it’s easier than ever to change travel plans in a streamlined, intuitive manner across currencies, time zones and FX rates.

Datta noted that localized payment methods can also eliminate some of the FX pain points and save on cross-border fees.

Demonetization Sets the Stage

The stage has been set for modern payment methods to take root in India, said Marovitz, as demonetization took effect six years ago under Prime Minister Narendra Modi. That helped give rise to using digital payments and cards, but the market’s been a bit bifurcated, given the fact that there are a billion debit cards in the country and only about 60 million credit cards.

The RuPay card payment network has become hugely important to consumers, and its domestic dominance has been making inroads outside of the country. Merchants who simply look at what’s most popular in terms of payments methods, in the aggregate, will miss out on new revenue generating activities.

Related: Low-Code ‘Legos’ Help Indian Firms Scale Cross-Border Payments

As Cashfree’s Datta said, though cards may have been the most prevalent online payment method a few years back, in recent years, UPI has been emerging as a preferred, real-time payments option, giving rise to more transaction volume than debit and credit cards combined.

“It’s probably the most efficient that payments can be,” he said, taking note of the streamlined, instant and real-time bank-to-bank transfers. That speed can be a lure for businesses that operate outside of India and want entry into the market, or firms that are based in India and want to serve Indian consumers as they go abroad.

There’s been at least some movement by the central bank of India to help improve money mobility, as it has set up the liberalized remittance scheme, which lets individuals remit as much as $250,000 in a given year to fund education, travel or gifting.

Providers, he said, are faced with the task of improving the speed of money movement and reconciling those fund flows. Datta said that those improvements can take place through low-code or no-code solutions and application programming interfaces (APIs) on offer from Cashfree.

“The value proposition we’re bringing is to enable local payment methods,” he said. The advanced technologies can be leveraged to help documentation such as offer letters and passports that can accompany payments, and check spending tallies against that $250,000 limit.

Payments aggregators are increasingly important, he said, as enterprises would otherwise have to connect and integrate with banks on a market-by-market basis. Enabling local payments acceptance for cross-border transactions can be a tough hurdle, Datta added.

Aggregators such as Cashfree can help cut the cost of transactions significantly, with 60% savings on FX rates and splitting travel-related payments to make sure the right amount makes it to the right bank account.

The Students

The number of Indian students traveling abroad was up 44% in 2021 over previous years, and the country is poised to overtake China as the country sending the largest number of international students to pursue learning in different parts of the world (it’s currently No. 2).

As Kumar said, “Indian students are motivated to have a global career and a global education.” Paying tuition becomes a challenge, given the fact that many Indian families have trouble accessing a variety of financial products in those new countries.

See also: Cashfree Teams with EasyTransfer to Facilitate Indian University Payments Abroad

Platforms such as Leap help consumers start new financial journeys in those host countries, while underwriting the loans and helping borrowers satisfy the documentation and regulatory requirements (such as visas) to send that capital out of India in the first place.

The company also issues credit cards to students, which can be used for a variety of payments to start building credit from the first day in their new country of study. Disbursements can also be made directly to the institution, rather than winding up in the student’s account and being paid to the school at a later date.

“We’re able to lower the cost of capital significantly because we can originate the loans across a range of destination currencies,” he said, adding, “India is one of the most exiting FinTech markets for digital payments, and the infrastructure is there.”