Digital payments boom predicted for India

India represents “a large and growing global economy that is still very much untapped” for online retailers, but those moving onto the country must first consider the complexities and risks of doing business in India, says Payscout.

The US-based global merchant service provider says that US entrepreneurs can no longer rely solely on domestic electronic commerce (e-commerce) and cites recent forecasts that India’s digital payments market will grow tenfold to US$500bn annually by 2020, contributing 15% to the country’s gross domestic product (GDP).

The company notes that smartphone penetration is driving the surge. Currently 78% of all payments in India are still in cash, against 21% in developed markets and around 55% on average in other emerging markets. However, by 2020 half of the India’s internet users will use digital payments, and the top 100m users will drive 70% of gross merchandise value.

“Emerging markets are becoming the largest growth area for e-commerce,” comments Payscout. “With the rise in digital payments, India’s GDP will increase 15% and non-cash transactions will exceed cash transactions by 2023 – making India a ripe market for global entrepreneurs.”

It adds that with online luxury stores aimed at Indian consumers seeing an increase in sales of US$35b in 2016 – and the premium side of online sales predicted to double by 2020 – cross-border commerce is where the payments industry is heading.

However, what works in the West may not work in India. In the US, retailers grapple with the ability to offer customers personalised experiences across both their online and physical stores. In India, far more complex challenges exist within the ecosystem of organised and unorganised retail.

In addition not all US and European banks are able to partner with foreign entities. E-commerce merchants who fail to appreciate this can attempt to sell new products to emerging markets through faulty managed service provider (MSP) solutions and flop financially.

Payscout’s chief executive officer (CEO), Cleveland Brown, says that the most successful merchants in India’s market are those with a robust, secure, and flexible payment infrastructure, as well as a relationship with a processor that is well-versed in guiding companies through every country’s cross-border policies and requirements.

“With India having one of the fastest-growing e-commerce consumer demands in the world, security of client transactions must develop to stay on pace with the rise in e-commerce,” adds Brown.

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