Payments are changing the shape of Indian commerce and brands need to be aware of the changes taking place. WARC's Asia Editor, Gabey Goh, introduces a deep-dive into the insights you need to know. 

To say the digitisation of India’s payments landscape will be a game changer for how consumers transact and interact with brands seems an obvious statement to make. Since prime minister Narendra Modi made moves in 2016 to shift the country’s economy toward a less cash-intensive future, the market has witnessed an explosion of digital payment providers and services.

The pace of change taking place in the nation is massive when you look at some of the absolute numbers. According to National Payments Corporation of India (NPCI), UPI (Unified Payments Interface) transactions hit an all-time high of INR955.02 million (US$13.46 million) in September 2019 compared with INR918.35 million (US$129.56 million) in August.

There has been a 135% year-on-year increase in the number of transactions, and UPI is soon expected to cross one billion monthly transactions.

UPI is an instant real-time payment system developed by facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

Staggering growth

The number of digital payment users is expected to increase to 300 million from 100 million, with the per capita digital transactions, which stood at 22 in March 2019, expected to rise to 220 by March 2022. E-commerce payment system Paytm currently lays claim to a monthly active user (MAU) base of around 140 million while digital payments platform Google Pay reportedly hit 67 million MAUs in India as of September 2019.

Hundreds of millions. Double, triple-digit percentage growth.

The numbers seem staggering and they are, especially when taken into consideration that much of this has occurred in the last two to three years.

What’s even more astounding is that there’s still room to grow when you realise these numbers only reflect a fraction of a 1.4 billion-strong nation. According to a report by CUTS International, only 48% of merchants in India’s cities accept digital payments, and digital payments account for only 10% of all transactions in India. There are also 250 million Indians who are on the internet, but not using digital payments yet.

Opportunities for brands

For brands seeking better ways of connecting with consumers, the rise of digital payments represents a greenfield opportunity. The digitisation of the way consumers spend brings with it the capability for better behavioural insights, shorter paths to purchase and makes true omnichannel experiences a real possibility.

In our inaugural Spotlight series, expert contributors shine the light on some of the facets of India’s digital payments future that brands need to start thinking about to gain that competitive advantage.

Dentsu Impact’s Aditya Kilpady offers readers a 3C’s framework (Cash. China. Convenience.) for understanding the new digital payments landscape and how the full potential of this ecosystem can be unlocked. He points out that in India’s long history, the country has constantly evolved when it came to making payments, the current cash obsession is only a mere 70 years old.

“The symbols of paper currency (namely the Ashok Chakra and the face of Mahatma Gandhi) espoused the ideals of India. It’s only logical that the next wave of digital payment would reflect how we live today,” he writes.

Meanwhile, Mamatha Morvankar of Omnicom Media Group India offers a primer on how omnichannel marketing ambitions can be unlocked, outlining how data derived from digital transactions can help close the gap between brand-building and purchase decision-making. But as with any nascent space, she advises flexibility in how brands work with partners.

“The multiple players now offering digital payments have fragmented the market,” she said. “It is highly possible that two or three players with distinct offerings will become the market leaders in this space in India. Therefore, brands should be cognizant of this and ensure they have a flexible model to work with any.”

Looking at the e-commerce space, which is a natural engine of digital payment adoption, R3’s Seema Punwani highlights a burgeoning wave that brands must be prepared to leverage or miss losing out – social commerce. She observes that the popularity of social commerce is also driven by certain unique Indian conditions, such as housewives and stay-at-home mothers using social platforms to sell and the startups enabling them to do so.

“Brands can consider social stores and leverage social commerce especially for niche products and when entering new markets,” she adds.

And finally, Yousuf Rangoonwala, Aniruddh Subramanian and Nikhil Pillai from Famous Innovations, take a closer look at realities behind the pace of digital payment and e-commerce adoption. Ensuring seamless experiences in e-commerce journeys will be key to ensuring online newcomers not only navigate and transact but continue to do so.

They also break down the nuances between the mindsets of digital-native millennials and mobile-native Gen-Zers. “The millennial audience is still sold on the promise of products and services, but content is king for Gen-Z.”

India still has a long way to go to achieve its vision of a cashless or “cash-lite economy” society, but the opportunities that can be unlocked are only a matter of time. Time that prudent marketers will need, to prepare for a digital boon that comes attached with its own host of complexities and challenges.