Digital Payment modes are indeed impacting the Global Payment Industry, and in turn influencing the strategies of the ecommerce industry.
Digital payments have revolutionised the way people transact, and India has seen a significant shift towards digital payments in recent years. With the increasing adoption of smartphones and the availability of affordable internet services, Brands making a move on Gen Z via Digital Payments has become an integral part of India's retail landscape.
Harnessing the power of digital payments has become crucial for businesses to succeed in India's e-commerce market.
When was the last time you went to an ATM to withdraw some cash?
Cash transactions across the globe have declined drastically since 2020.
The online consumer’s payment behaviour has changed dramatically.
All accelerated by contactless payments, and the advance of secure payment methods, which has contributed to an increase in Digital Ecommerce Transactions.
How Gen Z’s preference for digital is changing the payments landscape
Who is Gen Z and how do they shop?
Gen Z, born between the mid-1990s and the early 2010s, is the first generation to grow up in the digital age, and they have a unique relationship with technology and digital payments.
Gen z payment preferences are quite different from the ones we adhere to - Going cashless.
Here are some ways Gen Z is influencing digital payments in the e-commerce market:
Increased use of mobile wallets: Gen Z is more likely to use mobile wallets like Paytm, PhonePe, and Google Pay for transactions. A survey by GlobalWebIndex found that 70% of Gen Z in India use mobile wallets, compared to 56% of Millennials and 49% of Gen X.
⭐ On an average, only 19% of online payments by Gen Z are through cash.
Emphasis on security: Gen Z places a high value on security and privacy, and they are more likely to use payment methods that offer secure transactions. They are also more likely to use two-factor authentication and other security measures to protect their sensitive information.
⭐ ATM usage fell by a whopping 47% in April 2020 (in India alone), while the world experienced a decline of over 40% per month on average.
Expectation of convenience: Gen Z expects convenience in all aspects of their lives, and they are more likely to use digital payments that offer a seamless and easy checkout experience. Businesses that offer one-click checkout options, auto-fill forms, and other convenient features are more likely to attract Gen Z customers.
⭐ Around 89% of Gen Z want a cashless checkout experience, showing how gen z payment preferences are different from their elder ones.
Influence of social media: Gen Z is highly influenced by social media, and businesses that have a strong social media presence are more likely to attract Gen Z customers. Social media platforms like Instagram and Snapchat have also introduced payment features, allowing users to make transactions without leaving the app.
⭐ Over 92% of Gen Z are on at least one Social platform, and approximately 56% of them purchase directly from Social Media, or are directed to purchase via a payment gateway
Interest in cryptocurrency: Gen Z is more likely to be interested in cryptocurrency and blockchain technology, and they may be more open to using cryptocurrencies for transactions in the future.
⭐ The Digitising India initiative guarantees that even cryptocurrency will enter the majority of ecommerce by the year of 2028
In conclusion, Gen Z is a key demographic in the e-commerce market, and their unique relationship with technology and digital payments is influencing the way businesses approach digital payments. By offering secure and convenient payment options, businesses can attract Gen Z customers and build loyalty among this important demographic.
How to attract Gen Z
Accept multiple payment options: Businesses should offer customers a variety of digital payment options such as credit cards, debit cards, net banking, mobile wallets, UPI, and others. This will help customers choose the most convenient payment method for them and increase the chances of completing the transaction.
Offer discounts and cashbacks: Offering discounts and cashback offers to customers who choose digital payments is a great way to incentivize them to use these payment methods. This will also help increase customer loyalty and drive repeat business.
Provide a seamless checkout experience: A seamless checkout experience is critical for driving conversions in e-commerce. Businesses should ensure that the checkout process is easy, secure, and quick. Offering one-click checkout options, auto-fill forms, and using trusted payment gateways can help improve the checkout experience.
Utilise analytics and customer insights: By leveraging customer data and analytics, businesses can gain insights into customer behaviour and preferences. This can help businesses optimise their payment process and offer personalised recommendations to customers, increasing the likelihood of conversion.
Invest in security measures: As more customers move towards digital payments, businesses must ensure that their payment systems are secure and reliable. Investing in robust security measures such as two-factor authentication, encryption, and fraud detection systems can help build trust with customers and protect their sensitive information.
Payment Integration and Engagement:
Payments are moving toward an embedded ecosystem to improve seamlessness - where they are integrated into various platforms (Ecommerce stores, Social shopping, WhatsApp Commerce etc) in order to simplify the customer’s purchase experience.
And obviously to benefit the merchant and payment provider as well.
Urging everyone to open their doors to the larger market via Application Programming Interface (API) driven expansion of banking.
Harnessing the power of digital payments
The first-ever online payment is said to be for a Pizza 🍕, back in 1994!
To think we have come this long in a span of a couple years in which James Cameron made Avatar 1 & 2… It’s amazing.
Today, we have several game changers in the Digital Payments space - BNPL, UPI, Wallets, Netbanking and more.
And why are D2C brands trying to “Make a Move” on the Gen Z?
Harnessing this power has become more important than ever, because
⭐ Digital Banking Platforms saw a 187% increase in traffic from March 2020 to March 2021
⭐ Similarly, the Mobile Banking Software industry experienced an increase by 271%
⭐ Digital payments in India have grown at a Compound Annual Growth Rate (CAGR) of 55.1% between 2015 and 2020.
⭐ As of February 2021, there were more than 42.5 million Unified Payments Interface (UPI) transactions per day in India
⭐ The Gross Merchandise Value (GMV) of digital wallet transactions in India is expected to reach USD 190-200 billion by 2023.
Online consumers expect Versatility -
⭐ Brands that have a mobile wallet option see orders grow 14% and conversion rates double
⭐ 92% of online consumers are more likely to make a purchase if they see more payment options
What Are the Payment Option Types in India?
In India, there is a suite of various options for paying, which accord with various preferences of consumers and their needs. Thus, the landscape is divided into traditional methods of paying and modern digital solutions.
Cash: Cash is one of the most prevalent options in payments, especially in rural areas and for small-volume transactions.
Credit and Debit Cards: These cards find their acceptance at virtually all online and offline platforms, starting from petty purchases to bigger amounts.
Digital Wallets: The facility provided by Paytm, PhonePe, and Google Pay has turned these modes popular because of their ease and feasibility at most platforms.
Unified Payments Interface (UPI): The UPI has brought a whole new level of innovation into the digital payment area in India. Any decline in usage of UPI is not very probable; it is capable of linking bank accounts to facilitate instant money transfers using cell phones. This is one of the most well-accepted modes of transaction in P2P and merchant transactions.
Net Banking: As net banking is directly linked with bank accounts, this payment option is relatively secure for fund transfers and making payments for online purchases.
Prepaid Cards and Gift Cards: Primarily designed for gifting purposes or for specific purchases, these cards will have a preloaded amount and can be utilised until the balance has been spent.
Buy Now, Pay Later (BNPL): The newest entrant and thus a current favourite, BNPL services allow consumers to make upfront purchases and repay the items in instalments.
What is a Payment Method?
A payment method is the instrument or process a customer uses to pay for a product or service. Examples include cash, cheques, credit cards, digital wallets, and online bank transfers. Factors such as convenience, security, transaction fees, and speed influence the choice of payment method.
Types of Payment Methods
There are several types of payment methods available to satisfy different needs and preferences.
Cash Payment: This is a traditional type of payment. It still prevails in many sectors, especially small businesses and in local markets.
Card Payments: These include credit and debit cards, which are very common on account of their convenience and enhanced security features. Credit cards offer the added advantage of deferred payments.
Bank Transfers: This deal pertains to the direct transfer of funds from one bank account to another. The whole process is highly safe and, therefore, is in wide use when large deals or transactions take place.
Digital Wallets: It includes web applications that store information regarding payment in them and are used for quick transactions. Their examples include Paytm, PhonePe, and Google Pay. UPI: Real-time online payment system, facilitating the instant transfer of funds from one bank account to another through a mobile platform. UPI has gained significant traction in India due to ease and security.
Cryptocurrency: A recent form of payment, especially in tech-savviness and niche markets. Cryptocurrencies such as Bitcoin and Ethereum are used for digital transactions. However, cryptocurrencies have not been widely adopted in India to date.
Cheque Payments: These are less in use but still prevalent among some business dealings.
Prepaid and Gift Cards: These are predominantly utilised for controlled spending and gifting, wherein a fixed sum of money gets pre-loaded onto the cards.
EMI and BNPL Options: In allowing consumers to purchase products on credit and return the money in instalments, customers can afford such high-value purchases.
Most Common Online Payments by type, in India, as of APR 2024
Online Payments in India, as of April 2024, continue to occur via several popular methods:
UPI Payments: UPI continues to be the most wanted mode of online payment, accounting for over 50% of digital transactions in the country. This is because it is so seamlessly integrated with mobile phones and is therefore very easy to use.
Digital Wallets: Paytm, PhonePe, and Google Pay are other digital wallets used by a majority for offline and online purchases. The major reason for this is that they give cashback, rewards, and are also very easy to use.
Credit and Debit Card Payments: Cards remain the preferred choice for large value-based transactions and are considered an accepted norm on every e-commerce website.
Net Banking: People still prefer net banking to facilitate direct bank transactions without using third-party apps or services.
BNPL (Buy Now, Pay Later): BNPL is gaining traction, especially amongst the newer, younger customers as it provides flexibility similar to a credit card, with the convenience of instalments.
Clearly, different customers have different ways of paying for their purchases. E-commerce businesses, therefore, need to incorporate all these various options and modes of payment in order for them to attend to all customers' preferences and offer them an improved shopping experience. Various businesses, in this regard, apply different best-suited payment methods for improved sales and customer satisfaction.
Most Common Online Payments in India (as of April 2024)
- UPI Payments: UPI continues to dominate, accounting for over 50% of digital transactions in India.
- Digital Wallets: Paytm, PhonePe, and Google Pay remain popular due to cashback and ease of use.
- Credit and Debit Card Payments: Preferred for large transactions.
- Net Banking: Direct, secure, and still widely used.
- BNPL: Gaining traction among younger customers for its flexibility and ease of payment.
Businesses that integrate various payment options can better cater to different customer preferences, improving the overall shopping experience and driving sales.
10 Globally used Digital Payment Modes
- Credit Cards: Credit cards are a popular payment method for online transactions globally. According to a report by eMarketer, credit cards accounted for 39% of global e-commerce transactions in 2020.
- Debit Cards: Debit cards are also a popular payment method for online transactions globally. According to the same report by eMarketer, debit cards accounted for 30% of global e-commerce transactions in 2020.
- Net Banking: Net banking is a payment method that allows customers to make transactions directly from their bank account. According to a report by the Reserve Bank of India, net banking transactions in India grew at a CAGR of 26.4% between 2015 and 2020.
- Mobile Wallets: Mobile wallets like Paytm, PhonePe, and Google Pay have seen significant growth in recent years. According to a report by RedSeer, the GMV of digital wallet transactions in India is expected to reach USD 190-200 billion by 2023.
- UPI: Unified Payments Interface (UPI) is a payment method that allows customers to make instant payments directly from their bank account. As of February 2021, there were more than 42.5 million UPI transactions per day in India, according to the National Payments Corporation of India.
- EMI: Equated Monthly Instalments (EMI) is a payment method that allows customers to pay for their purchases in instalments over a period of time. According to a report by RedSeer, EMI transactions in India grew at a CAGR of 32% between 2015 and 2020.
- Apple Pay: Apple Pay is a digital payment platform that allows customers to make transactions using their Apple devices. According to a report by Apple, the platform had over 700 million users worldwide in 2021.
- Google Pay: Google Pay is a digital payment platform that allows customers to make transactions using their Google account. According to a report by Statista, Google Pay had 150 million users worldwide in 2021.
- Prepaid Cards: Prepaid cards are a payment method that allows customers to make transactions using a prepaid card, which they can load with a certain amount of money. According to a report by TechSci Research, the prepaid card market in India is expected to grow at a CAGR of 28.5% between 2021 and 2026.
- Gift Cards: Gift cards are a payment method that allows customers to purchase gift cards and use them to pay for their purchases. According to a report by Qwikcilver, the gift card market in India is expected to reach USD 20 billion by 2025.
And as a must mention, we have…
Cash on Delivery: Cash on Delivery (COD) is a payment method that allows customers to pay for their purchases in cash when they receive their order. According to a report by RedSeer, COD accounted for 55% of all e-commerce transactions in India in 2020.
Top 2 Digital Payment Modes adopted in India and why..
- Unified Payments Interface (UPI):
UPI is a real-time payment system developed by the National Payments Corporation of India (NPCI) that allows customers to make transactions directly from their bank account. It has become the most popular digital payment mode in India due to its ease of use, security, and speed. According to a report by the NPCI, UPI recorded 2.3 billion transactions worth INR 4.6 trillion in February 2021, making it the most used digital payment mode in India.
- Mobile Wallets:
Mobile wallets like Paytm, PhonePe, and Google Pay are also popular digital payment modes in India. These wallets allow customers to store money and make transactions using their mobile phones. They have become popular due to their convenience, ease of use, and cashback offers. According to a report by Statista, mobile wallet transactions in India are projected to reach USD 1 trillion by 2023.
Solution?
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