Why E-payments Is Grabbing The Eyeballs


The ‘can’t touch - won’t buy’ Indian consumer is fast morphing into a key punching, net happy, touch screen poking e-shopper as the internet expands its reach in the country.

A KPMG-Internet and Mobile Association of India (IAMAI) report put the size of the Indian e-commerce market in 2013 at around $13 billion. According to some estimates, the Indian e-commerce which witnessed a growth of more than 80% last year and is likely to continue growing and touch $70 billion by 2020. But this pales in comparison to sales of around $200 billion in China and total global online sales of $1.22 trillion in 2013. The travel segment accounts for more than 70 percent of online transactions in India. Online shoppers still account for less than one percent of total Indian shoppers. Continuing to triangulate the market, a Forrester report expects the Indian B2C e-commerce market to log the fastest growth in Asia-Pacific region at a CAGR of 57% during 2012-16. The non-travel e-commerce market size is estimated to touch $9 billion in 2016 and $70 billion by 2020, notching a CAGR of 61%.

A huge potential

According to a McKinsey study, India could have 330-370 million internet users by 2015. It would have the second largest base of internet users in the world after China. This spells a bonanza for e-tailers as well as service and solution providers. Currently a mere 12% of Indians transact online against more than 50% in China and 64% in the US. It is the sheer convenience of transacting 24/7 from anywhere that is adding to the popularity of online payments.

Innovations around simplifying payments on mobile would definitely grab the attention of investors and merchants. The obvious reason is the increasing use of mobile devices for making purchases. We are already seeing 15-16% of traffic originating from mobile browsers. In my opinion, this has potential to more than treble to 50% in the next 1.5 years. In India, smartphones have catalysed online retailing by bringing shops to fingertips.  Nearly 6% of Indians use smartphones. Among the people accessing the internet, 32% access it via mobiles. E-shopping can be expected to grow exponentially with the increasing use of smartphones grows.

E-commerce has been gaining popularity in Tier-II and Tier-III cities.

The roadblocks

Internet connectivity and online safety pose a challenge to consumers and merchants. About 25% of the consumers are still reluctant to transact online because of security concerns. This is where leading payment solution providers have to play a key role in providing reassurance and secure solutions.

The increase in e-payments will provide a boost because collecting payments is a problem across multiple domains and demographics. Most e-tail sites are forced to offer a Cash-on-Delivery (COD) option because nearly 40% of online transactions are preferred by users to be on a COD basis. To add to the industry’s woes, it is estimated that 45% of COD orders are returned by the customer. The growing trend of e-payments will provide a big relief to the industry and help prune costs.

‘Digital Stored Value Accounts’ can also be a game-changer The RBI has given it a leg up by relaxing the KYC norms for a monthly transaction limit of  less thanINR 10,000. One would see a lot of innovations around p2p money transfers as an example using this core instrument in the coming months.