Businesses Need to Accept Local Payment Methods in India to Meet Consumer Preferences
To secure a foothold in the $36.5 billion1 Indian ecommerce market, digital commerce leaders need to offer a range of payment options. Even before the offline-to-online shift driven by COVID-19, increases in disposable income and smartphone penetration have been driving substantial growth in India’s domestic and cross-border ecommerce markets. Overall Internet penetration is around 50%.2 In a country of 1.5 billion people, that level of internet adoption creates both a massive market and tremendous opportunity for future growth.
By giving Indian customers the option to use the payment methods they already trust, businesses can reduce cart abandonment, create loyalty and grow sales. Here are the local payment methods in India that consumers prefer for domestic and cross-border shopping.
Most Popular Local Payment Method in India
UPI, UPI, UPI
The story in India is all about UPI, the government-sponsored National Payments Corporation of India’s “Unified Payments Interface”, which provides a consistent approach to fast, secure and cheap payments across over 140 banks and virtually all of the ewallets in India.
After the UPI 2.0 launch in 2018, adoption has grown at an astounding 700% from 2018-2019 and 140% from 2019-20203 and has become the foundation of eWallet growth stories like Google Pay, WhatsApp Pay, Flipkart’s PhonePe. Even India’s longtime leader Paytm began to accept the UPI standard along with its proprietary format.
As a result, UPI acceptance across both bank transfers and ewallets is now very high, and consumers are well educated on the user experience and expect the transparency, instant money movement and consistency of UPI transactions.
The use of ewallets is rising in India, with an expected compound annual growth rate of 80% to 2021.1 eWallets are well on their way to becoming the dominant online payment method and must be part of any ecommerce or mobile-commerce checkout experience.
In addition to simple payments, eWallets in India have become “super apps”, with features that engage users throughout the day:
- Paytm: The Paytm app enables Indian consumers to purchase a variety of goods, as well as book travel and event tickets, invest, and pay their bills. Paytm is the most popular payment method in India with 20.3% of online shoppers ranking it as their favorite way to pay according to Rapyd’s 2020 Consumer Online Buying and Payment Study4
- Google Pay and Amazon Pay – These international entrants built natively for India on top of UPI and local partnerships. 19% of online shoppers in India rank Google Pay as their favorite payment method.4
- PhonePe: PhonePe is also a one-stop cashless app, enabling Indian consumers to shop, pay bills, and transfer funds from one central platform.
- Airtel Money: The Airtel Money app provides a broad spectrum of financial features, allowing consumers to shop online, access banking services and purchase insurance, among other options.
Credit and Debit Cards
Nationally, card penetration is low. But the actual value of sales paid with cards is 29% of the eCommerce pie,1 so offering Visa, Mastercard, and the national RuPay card scheme is important to addressing the top end of the market.
Many cards in India are not approved for international purchases. Businesses who wish to sell cross-border should seek a local partner for credit card payment processing and offer other locally preferred payment methods.
India has long had a mature system of online bank transfers – from “Netbanking”, enabling users to authenticate to their bank and approve an online purchase, to IMPS, the instant transfer network, or to more traditional NEFT and RTGS. Indians have a wide range of bank transfer options in addition to UPI. As bank account penetration increases, transfer rates will continue to rise, particularly for higher value transactions.
Given the low level of trust many buyers have for online sellers, cash, in particular, cash-on-delivery, remains a crucial online payment method in India. After a brief spurt of government-led “demonetization”, cash has reentered the economy in a big way, but the growth of UPI, ewallets and card readers for “payment on delivery” may eventually cut cash’s hold on buyer trust.
Diverse Payments for a Diverse Market
India is a remarkably diverse country. Cultures, languages and consumer preferences differ significantly from region to region. With so much growth on the horizon, the Indian ecommerce market cannot be ignored. Businesses that want to capture a slice of this market need the flexibility to offer the local payment methods consumers across Indian want today, tomorrow and in the future.
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