Voice of the Industry

Charmaine Oak, Practice Lead, Shift Thought: Online payments and ecommerce in India

Friday 19 September 2014 08:25 CET | Editor: Melisande Mual | Voice of the industry

Cash-on-delivery, move over! The wallets are here

India’s ecommerce market is set to soar to USD 20 billion by 2020 (1), with growth generated, mainly, by the use of smartphones. The USD 4 billion ecommerce is being driven by cheap handsets and mobile data plans that allow consumers to buy from their mobile devices. As we say at Shift Thought, India’s payments market is Born Digital Money, and this demands convergent payment services of the variety we describe in our Digital Money in India 2014 Viewport, which reflects our recent market studies in India, and from which this analysis is taken.

India’s 1.25 billion population is spread across 29 states and 7 union territories and, as a consequence, the complexity of this market has been likened to that of all the European markets put together.

Marketing to this highly fragmented group of people is challenging due to differences in regulations, income, religion, culture and, notably, the lack of a way for people to identify themselves. With just 58% of Indians registered at birth, it is no wonder that India is the largest user of cash amongst all emerging countries. With no identity, unsurprisingly just 48% of people have access to a bank account and the use of payment cards is confined to the privileged few.

Additionally, around 20% have access to the internet, and it is no surprise that online sales have just begun to grow. Recently, though, cash-on-delivery (COD), a uniquely Indian phenomenon, has penetrated into many urban markets. Flipkart popularised this convenient way for people to buy online with the utmost confidence and without plastic cards, and they have been rewarded by wave after wave of investments, as other online companies have been. Flipkart shut its payment gateway Payzippy and acquired Ngpay.

No surprise then that Amazon recently announced a USD 2 billion investment, looking at it from a 10-year standpoint. The Indian ecommerce market, worth little over their proposed investment, is estimated to grow perhaps even over USD 30 billion in the next 6 years (2) .

Our research shows that the way people pay is changing rapidly and the changes affect the very nature of business and the accessibility of the Indian market. Where once brick and mortar locations were vital, the young urban population has recently thrown off the shackles of poor internet access – they now take mobile data connections for granted, using WhatsApp and social media directly through mobile phones, iPads and a whole range of devices. In our recent market study in India in April2014, we mentioned that mobile wallets and prepaid payment instruments have flooded the market and challenged the prevailing COD model.

India is rapidly transforming its payment systems to cope with a 7% growth rate and doubling of GDP each decade. Moving to non-cash payments is one of the biggest issues that need to be addressed for the most effective growth of India. The heavy use of cash is significant, as the lack of governance is a major issue that directly affects the economy and well-being of people in the country. Enter Aadhaar.

Now, the largest biometric project in the world has already provided new ID to over 580 million people, and with these come new possibilities for electronic payments. With progressive leaders in place in the Government and at the Central Bank, the outlook and recent announcements point only to more rapid change.

Global ecommerce companies busily pursue their strategies to enter this nascent market, with hopes that the new government policies would help. Now, however, there has been a setback because of the restrictions that the Indian government has put on foreign direct investment (FDI) in local hypermarkets, supermarkets and other multi-brand retail.

(1) http://timesofindia.indiatimes.com/tech/tech-news/Low-cost-smartphones-fuelling-staggering-m-commerce-growth/articleshow/41702204.cms
(2) http://online.wsj.com/articles/amazon-takes-a-long-view-with-2-billion-india-investment-1407474521

Charmaine Oak is author of recently published “The Digital Money Game” and co-author of “Virtual Currencies - from Secrecy to Safety”. Charmaine is Practice Lead of UK-based Shift Thought, a consultancy that specialises in knowledge relating to how people pay in each part of the world, and how this is changing.

Shift Thought is a UK-based consultancy with distributors around the world. We offer access to our knowledge base through a self-service portal, and provide consulting and research services to our international customers that include banks, mobile operators, payment service providers and others.


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Keywords: Charmaine Oak, Shift Thought, online payments, ecommerce, India
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Countries: World