The e-commerce sector is witnessing a growth in the use of alternative payment methods, which accounted for nearly 58 per cent in 2023, according to a report by data and analytics company GlobalData. Mobile and digital wallets have eclipsed traditional payment modes, according to the report.
Use of cash has fallen significantly, with an increase in preference for Amazon Pay, Google Pay and card payments, among other alternative options.
Demonetisation effect
“Alternative payments have gained huge traction in India since the demonetisation in 2016. The Covid-19 pandemic has accelerated this trend as both consumers and merchants preferred digital payments to avoid exposing themselves to disease vectors such as cash. The growing popularity of alternative payment brands among consumers and merchants also supported this trend,” said Ravi Sharma, Lead Banking and Payments Analyst at GlobalData.
According to GlobalData’s 2023 Financial Services Consumer Survey, alternative payment solutions have consistently gained popularity in the last five years
Payment cards are the second most popular e-commerce payment method in India, with a share of 25.7 per cent, with credit and charge being the preferred card types, accounting for 15.4 per cent in 2023. Cash, which is widely used for in-store payments in India, accounts for only 6.2 per cent share in online purchases.
E-commerce growth
The growth of India’s e-commerce market is supported by rising internet and smartphone penetration.
India’s e-commerce market is projected to see a compound annual growth rate (CAGR) of 20.9 per cent, from $147.5 billion in 2024 to $315.5 billion in 2028. As per the Telecom Regulatory Authority of India, there were 881.3 million internet subscribers, up from 865.9 million in December 2022.
According to e-commerce retailer Flipkart, the online shopper base in India is anticipated to increase to 400–450 million by 2027. In 2019, the company launched an initiative called Flipkart Samarth Programme to help small and medium enterprises sell their products online. As of December 2023, the programme has spread to 28 states across the country.
“The uptrend in e-commerce sales in India is likely to continue over the next few years supported by the growing consumer preference, improving payment infrastructure, and growing popularity of alternative payment solutions,” Sharma added.