A recently released study from Google (Alphabet Inc.) and the Boston Consulting Group (BCG) projects an increase in digital payments in India from its current level of $50 billion annually to $500 billion by the year 2020 – a tenfold increase in less than four years.
Rajan Anandan, Google’s Vice President for Southeast Asia and India, suggests that the growth is spurred by smartphone penetration and supported by regulatory policy. As further indication of the growing importance of the Indian digital consumer, Anandan noted that by 2020, 50% of the country’s internet users will use digital payments and that the top 100 million users will drive 70% of gross merchandise value.
Per the International Monetary Fund World Economic Outlook, India is the third-largest economy in Asia and the seventh largest in the world, presenting a vast—and increasingly prosperous—market for global ecommerce entrepreneurs. The Google/BCG study predicts that with the rise in digital payments, the GDP of India will rise by 15%—which is great news for India and also great news for digital entrepreneurs all over the world.
The move to non-cash transactions is taking place across the entire spectrum of the Indian consumer economy: online shopping, utility bill payments, and movie ticket purchases were identified as the top three services for which Indian users make digital payments. Online payments through digital wallets and debit/credit cards have been emerging as a preferred transaction mode, mainly due to ease of transaction, availability of smartphones and internet access, and enhanced security and encryption methods.
In terms of total transactions, the Indian digital payments story—which includes in-person as well as ecommerce payments—will be dominated by very small purchases and payments. Over 50% of person-to-merchant transactions are expected to be less than 100 rupees ($1.49US).
However, as is the case in China, there is a large segment of the Indian population with significant amounts of disposable income and a strong desire for shopping opportunities. Indeed, a recent study by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), suggests that online luxury stores aimed at Indian consumers will see an increase in sales of $35 billion in 2016, and that the premium side of online sales will double by 2020. This growth is being attributed to several factors:
• The influence of western culture on the Indian retail market.
• Increased internet access: India is the third-largest country in the world in terms of internet access, with 140 million internet users.
• Increased awareness: Partly, as a result of increased internet access, people in India are more aware of global fashion and luxury trends, and are more inclined to accept these trends in their daily lives.
• Higher disposable income: Increasing income has brought a drastic change in the spending patterns of Indian consumers, particularly the young.
• A growing middle class: Aspirational purchases on the part of the rising middle class in India offer the opportunity to online luxury retailers to reach a larger (and growing) market.
It is encouraging to see an emerging economy like India’s benefiting from smart regulatory policy that is designed to support entrepreneurs. I hope other foreign markets will take notice and adopt similar infrastructures, not unlike what we have here in the U.S., that will protect companies doing business across borders. The Indian economy is opening up and presenting an enormous entrepreneurial opportunity and Payscout is working closely with client companies of all sizes in all risk verticals to implement our turnkey model for managing global payments internationally, including the Indian market.
Making the most of this developing growth opportunity requires 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. Furthermore, with digital purchasing on the rise, especially in India, entrepreneurs should be looking to enter the global market to capitalize on industries showing a high rate of ecommerce activity.
Cleveland Brown is CEO of Payscout.