Emerging Trends In Payments: Digitizing Commerce


Mobile phones have become a necessity in almost every aspect of our lives. We consume lot of information on our phones, from reading news to checking emails and so on. Far from being a lifestyle product, this device has not only changed the way we communicated but also changed the way we transact and do business.

You might be tempted to say, “Oh, mobile isn’t what we are focusing on, we’re a brick and mortar type of business.” But mobile affects anyone who is selling something. If you are a restaurant, mobile is how people are ordering their food and deciding where to have lunch today and dinner tomorrow. If you are a retailer, mobile is the platform where people search for products and their prices before they buy in the store.

People are using their smartphones to do almost everything, and if they can’t find something on their mobile phone, they’re frustrated and ready to leap to the first offering that comes along.

So, it’s no longer a question of when and how mobile will emerge as a payments and commerce platform, but of how will it change our lives. Adopting a mobile-first mindset in payments means adopting it in your business first. We have listed out a few trends that are dramatically changing the payments and mobile commerce landscape and will apply broadly to anyone willing to take the leap. 

Shift away from cash

About 71% of regular shoppers in India prefer cashless transactions, be it using credit cards, debit cards or net banking, show Ernst & Young survey findings. While technology has changed the landscape of payments, the economy has also provided the necessary conditions for retailers to benefit from these higher levels of consumer activity.

The regulator and the government are encouraging and incentivising digital payments which is an attempt to eliminate cash transactions. 2016 will be a turning point for the payments ecosystem in India. In addition, with the emergence of payment banks, UPI, multiple payment options through the mobile device (like wallets, bitcoins etc.), efforts are being made towards making India a cashless economy. If we look at RBI data, the number of mobile wallet users has already surpassed the number of credit card users in India. (As of Nov 2015, India has 22 million credit card holders and over 150 million wallet users).

Research says that mobile innovations will witness a growth of 23.2 per cent CAGR through 2020.  Therefore, it’s imperative that your business is setup to accept all forms of payments.

Small towns will drive growth

The story of digital commerce in India is going to be driven by tier-2 cities and beyond.

Rising incomes and easing technology has helped shift many consumers in small towns to online shopping, opening up a huge opportunity for digitization. Even though the penetration of mobile payment apps among smartphone users is nearly similar across towns of all sizes (57% in large towns and 52% in small towns), usage on these apps is higher among small town consumers according to data culled from Nielsen Informate Mobile Insights. Mobile wallet transactions mirror the trend, having gone up 35% (in volume terms) from 40 million in May to 54 million in July this year, with around 40-50% transactions coming from Tier-II and Tier-III towns now as against barely anything a year ago. 

Safety & Security

India has the highest number of online shoppers yet in 2015 cash was the most preferred mode of payment which accounted to 45 % of the total sale, followed by Credit/Debit Card 35%, volumes through online channels contributed 12% and wallets contributed 8%.  Consumers are skeptical about making payments online because of safety issues and frauds. But the good news is that the government has taken steps to ensure that the transactions made are safe, secure and there is transparency to minimize crime.

Two factor authentication, OTP generation,  blockchain technology are just some of the terms that we have heard of, but there is a lot of complexity that is involed in ensuring that transactions made digitally are safe, often breaches that happen are due to human error. For example banks do warn us to not share sensitive information with others, but theft worth millions happens even today because by mistake consumers share their data with someone.

As Bill Gates said in 1994, “Banking is important and not banks,” banking will shift to an app based model where the entire bank will now rest in one simple user friendly app. Crypto-currencies like bitcoins are slowly entering the Indian marketplace. While the number of mobile phone users and shoppers is increasing in India, internet penetration continues to be low.

The key factor that would pave way for transactions through the mobile is that merchants and consumers are able to transact offline without having to worry about the internet connection. The idea of having a cashless economy is very compelling, but there is a lot of infrastructure that is required, 2016 will be the year in which the base for the future will be built.