Indians Fast Turning to E-Payments

PwC estimates India's retail e-payment market will soar to $150 billion by next year thanks to growth among Internet and mobile phone users

By Swati Prasad

Nilaya Varma, associate director, PricewaterhouseCoopers, said: "Earlier, Indians were circumspect about using e-payment as they were comfortable paying in cash and through checks." Moreover, Internet access was expensive and not available everywhere.

"Today, the proliferation of telecommunications networks and mobile phones has filled this gap," Varma told ZDNet Asia in an e-mail interview.

As a result, India's retail e-payment market is likely to grow by nearly 70 percent in the next two years. The value of retail e-payments should reach between US$150 billion and US$180 billion by 2010, according to a report by financial research and consulting firm Celent.

Prathima Rajan, analyst, Celent, said: "Ever-increasing technological changes, growing Internet access and mobile subscriber base, rising consumer confidence, and convenient delivery and payment models are the prime factors fueling this trend."

However, despite the high growth, customer adoption of electronic payment channels in India is still at a nascent stage, Rajan told ZDNet Asia in an e-mail interview.

Growing popularity of e-payments is also reflected in the market for plastic money. According to Celent, the Indian debit and credit card market grew at a compounded annual rate of 128.7 percent between 2004 and 2008 and is expected to reach 210 million cards by 2010.

The report expects debit card circulation to increase to 169 million by 2010, up from 102.4 million today, while credit cards should increase from 27.5 million to 40 million during the same period.

Mario Shiliashki, general manager, PayPal South East Asia and India, told ZDNet Asia in an e-mail: "E-payments are growing in popularity across the globe and India is no exception."

PayPal is increasingly being used in India for cross-border trade through e-commerce sites for the sale of gemstones, jewelry, electronics and household items and for services such as Web design, travel and digital content.

Youth triggering faster adoption

With 75 percent of its population below the age of 35, e-payments have enormous potential in India.

"Young consumers who grew up with technology are coming of age and have their own bank accounts and mobile devices," Shiliashki said. These young consumers expect services to be mobile, 24-by-7 and at their fingertips. "It is this expectation that is driving businesses to enter the online space."

According to Rajan, a large chunk of online bill payments come from customers in the age group of 18 to 25 years. "They contribute nearly 46 percent of total online bill payments," she said.

In 2007, India's apex bank—the Reserve Bank of India—passed the Payments and Settlement Act to ensure security of electronic payments. Besides this, awareness and educational campaigns carried out by banks have also helped consumers in switching over to electronic payments.

According to a recent study undertaken by The Nielsen Company, Indians are growing more confident about shopping online with 78 percent of respondents (Internet users) having made an online purchase at some point.

The proliferation of mobile phones too has played catalyst to the growth of e-commerce. In terms of mobile subscriptions, India is the world's second-largest wireless market after China. Currently, there are 261 million mobile subscribers, including 73 million rural mobile users.

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