- Alternative payment methods command a staggering 58% share of the market in 2023 and gaining popularity for last five years.
- Mobile and digital wallets eclipse traditional payment modes, reflecting a paradigmatic change in consumer preferences and transactional behaviour.
- Government initiatives and the evolving digital ecosystem contribute to an environment ripe for further growth.
The Indian e-commerce landscape is rapidly evolving, marked by a significant increase in consumer engagement and technological advancement.
According to forecasts by GlobalData, the e-commerce payments in India are anticipated to surge by an impressive 23.8 per cent in 2024.
Ravi Sharma, banking and payments analyst at GlobalData, said the growth trajectory is a reflection of burgeoning consumer preference for online shopping, alongside an unprecedented rise in internet penetration and smartphone usage across the nation.
The projected elevation of the e-commerce market, which is set to grow at a compound annual growth rate (CAGR) of 18.7 per cent, underscores the potential of the sector as it escalates from Rs12.2 trillion (approximately $147.3 billion) in 2024 to an astounding Rs24.1 trillion (approximately $292.3 billion) by 2028.
A principal driver of this phenomenal growth in the e-commerce sector is the remarkable increase in internet accessibility.
According to data from the Telecom Regulatory Authority of India, the number of internet subscribers in India surged to 954 million by March 2024, a considerable leap from 881 million in March 2023.
The surge in connectivity has facilitated a dramatic shift in consumer behaviour, leading an expanding demographic to gravitate towards online shopping.
The proliferation of smartphones has only further catalysed this trend, as these devices serve as gateways to the vast digital marketplace, providing consumers with the convenience and flexibility to shop from the comfort of their homes.
As a result, small and medium-sized enterprises (SMEs) are increasingly entering the e-commerce space, spurred on by this favourable consumer environment.
Platforms such as Flipkart, Amazon, and Myntra have employed various tactics, including substantial discounts and cashback promotions during major sales events, to entice consumers and bolster online shopping activities. These initiatives are instrumental in creating a competitive yet consumer-friendly marketplace, thereby hastening the expansion of e-commerce in India.
Alternative payment solutions
A noteworthy aspect of the e-commerce surge in India, Sharma said is the marked preference for alternative payment methods.
GlobalData’s 2023 Financial Services Consumer Survey indicates that alternative payment solutions captured an impressive 58% share of the e-commerce payments market in 2023.
The shift reveals a significant transformation in consumer preferences, as mobile and digital wallets have emerged as the preferred methods of transaction, overshadowing traditional payment modes.
“Prominent brands such as Amazon Pay and Google Pay have gained traction, reflecting a broader trend wherein consumers favor the convenience and efficiency that these digital platforms provide,” Sharma said.
In contrast, payment cards represent the second most popular method, accounting for 25.7 per cent of the e-commerce payment landscape.
Of these, credit and charge cards have become notably favoured, holding a 15.4 per cent market share. Conversely, cash transactions, which historically dominated in-store purchases, have seen a decline in online purchases, reducing their share to a mere 6.2 per cent.
The decline in cash transactions can be attributed to the increasing acceptance of electronic payment methods within e-commerce, notably through innovations like Pay-On-Delivery with QR code functionality.
Major platforms such as Flipkart have adopted this method, allowing consumers to make payments at the time of delivery through any UPI-enabled application, including PhonePe, Google Pay, and MobiKwik. Such advancements not only enhance convenience for consumers but also signify progress in the overall payment infrastructure.
Government initiatives
The Indian government’s initiatives, especially the “Make in India” and “Startup India” campaigns, have played a significant role in shaping the e-commerce ecosystem.
“Make in India” has empowered numerous SMEs to augment their manufacturing capabilities and sell products across various channels, including online platforms, both domestically and internationally. This empowerment is crucial for driving overall market growth and enhancing India’s position as a burgeoning hub of online commerce.
Moreover, the increasing number of online shoppers plays a pivotal role in sustaining this upward trend in e-commerce. As consumer trust in digital transactions bolsters, so does the appetite for online shopping, which in turn drives further investments in technology and infrastructure.
Sharma said the trends observed over the past few years are indicative of a robust future for e-commerce payments in India.
“The convergence of rising consumer preferences, enhanced payment infrastructures, and the growing acceptance of alternative payment solutions will continue to propel the sector forward.”