On each visit to India I am absolutely floored by the breakneck speed of innovation in the fintech space. The size and scale of this market is really being driven by the Indian consumer. In 2017, Indian consumers used their mobile phones to access the internet nearly 80% of the time and we can only expect that number to be even higher at the end of 2018.
Every aspect of commerce has been transformed digitally. I have observed consumer buying behavior change in the following areas:
Ordering food: apps like Swiggy, Zomato Online, Uber Eats and Foodpanda are offering better discounts and features likes payment post delivery
Ride sharing: young people in cities don’t want the hassle or expense of owning cars. Uber and Ola equally control the market
Dating: Tinder and Bumble are more and more relevant
Shopping: other than eating out, all retail action has shifted online to apps like Purplle, Nyka, BigBasket, Flipkart and Amazon
Clothes: people buy on apps like Myntra, Jabong
Reading: this is all on Kindle and other screens rather than bookstores and libraries
Entertainment: people are using smart TVs, Amazon Fire TV with Netflix embedded over cable and video stores
Travel: rather than a traditional travel agent, consumers are all using MakeMyTrip and Booking.com
This is by no means a complete list – every facet of Indian life continues to be driven towards mobility and apps. The change in consumer preferences has prompted rapid payments system overhaul driven by the government’s investment in state-of-the-art technology, customer adoption and awareness campaigns. As a result, we are seeing a rapid expansion of the subscription economy, which is great news for merchants. For Cloud and SAAS merchants in particular needing recurring billing India is very much ready now. Fortunately, we are seeing more and more payment method development in India that meets this demand. The innovation in this area is impressive.
It’s been over a year since the Unified Payments Interface (UPI) launched in 2017, and version 2.0 set for release in the coming months will see some game-changing features like recurring billing. In October alone, there were over 76 million UPI transactions made. Fast-forward six months and in April 2018, 190 million transactions were made. People are excited about the reduction in costs and greater inclusion. It has major potential to disrupt the way Indian consumers pay digitally. Expect this to fuel a further shift away from cards and cash.
There continues to be much conjecture in the industry on whether UPI will also steal market share from mobile wallets or whether mobile wallets will prevail. Paytm has emerged as India’s most popular wallet platform and you only have to look around the streets to see just how much Indian consumers have embraced this payments innovation. Paytm wallets are accepted everywhere and the company expects to register one billion transactions every quarter. Therefore, in my opinion both UPI and mobile wallets are here to stay and are equally relevant.
When UPI 1.0 burst onto the India payments scene in 2017, consumers were the big winners, with an overhaul of person-to-person transactions. Indian consumers were presented a payments system that enabled money transfer between any two bank accounts using a smartphone. Users were able to make payments directly to merchants or other consumers without the hassle of typing in card details, codes or passwords. Volumes have grown rapidly. While they still only account for 2 to 3% of e-commerce market share, it is remarkable when you consider 1.0 is just over 12 months old. Merchants have been quick to embrace UPI 1.0, which has worked in their favor with consumers. Some merchants such as Uber, WhatsApp, Amazon, Flipkart and Reliance Jio have even been working on solutions based on UPI 2.0 in anticipation for its release.
When the platform’s next generation – UPI 2.0 - is unveiled, merchants are set to be the biggest winners. UPI 2.0 developments have focused on boosting peer to merchant transactions and empowering the subscription economy. In anticipation of UPI 2.0, the behavior shift has already begun to show. Consumer-to-business payments are increasing each month and we expect this to continue. The upgrade promises to enable recurring billing for bank transfers, using e-mandate.
UPI 2.0 will allow people to set up a mandate for recurring payments such as Netflix subscriptions and Amazon Prime memberships, among others. In addition, hundreds of millions of debit cards will shortly be enabled for recurring billing. Furthermore, Paytm and other wallets are now starting to support a three-year recurring billing model. Previously, this was only one year. With the launch of e-mandate this will enable recurring billing for netbanking – meaning all bank transfers will be renewed automatically without user action.
India’s digital payments market is projected to grow to USD 1 trillion over the next five years, according to Credit Suisse Group. With that the reality of a cashless economy isn’t far off. Increasingly, Indians want the flexibility of choosing their own payment methods and they are shaping their buying habits accordingly. As we see consumers abandon their obsession with cash in favor of innovation, it more important than ever before that merchants prioritize deep local payments strategies in India.
About Abhishek Banerjee
Chief Technology Officer
Abhishek has a deep background in payments and fraud prevention engineering, along with big data and analytics. Before joining Emergent Payments, Abhishek was the Head of Engineering for payments and risk at Western Union.
About Emergent Payments
A subsidiary of Emergent Technology Holdings, Emergent Payments offers a total global and local payments solution for high-growth markets. They serve as both a payment gateway and payment facilitator for digital merchants in Asia Pacific, Latin America, Africa, Middle East and Europe.
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