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How India’s digital transformation makes it an ideal market for sustained growth

How India’s digital transformation
makes it an ideal market
for sustained growth

Ramesh Narasimhan

Head of Digital Commerce India at Worldline

Over the past three decades, India has experienced immense change in just about every aspect of life. GDP per capita has soared, literacy is up, life expectancy is higher than ever, and the country’s digital economy is booming.

It is expected that consumer spending will double by 2025 and eCommerce penetration will increase by a factor of five, creating an ideal environment for exponential growth. Reports show FinTech investments in India almost doubled to US$3.7 billion in 2019, up from US$1.9 billion the previous year. This pegs the country as the world’s third largest FinTech hub, behind the US and the UK.

Accessing the growth opportunity that India represents requires deep understanding of a diverse, dynamic economy and a culture that is both ancient and cutting-edge, as well as the latest regulatory and payments environment. Here, I will explain why India is one of the most interesting markets for global online businesses to enter or expand into. 

India’s rapid digital transformation

India’s digital transformation was jumpstarted by ‘Digital India’, a campaign launched by the Indian government in 2015 aimed at ensuring the country’s citizens are connected through high-speed networks and can access a robust digital ecosystem. The economic rationale behind this campaign is clear; research from McKinsey states that digitization can create 65 million new jobs by 2025 and add US$1 trillion to the economy. This is a very positive indicator for global companies who are looking to build digital businesses in India.

Digital payments and FinTech are now a big part of life for many of the country’s 1.35 billion people, with 52% of the country adopting some form of FinTech. 99% of the adult population is part of the Aadhaar digital identity system and 60% of that population is under the age of 40. With an estimated 750 million smartphone users you can see how far India has travelled in its rapid digital transformation, providing a strong environment for many digital businesses.

Despite these impressive numbers, digital payments can still increase on a massive scale as a large part of the population has not fully adopted digital payments yet. If you look at eCommerce, it accounts for 3% of consumer spending in 2020, compared to 21% in the US. It is clear that despite India being a huge market and growing fast, it is still early days and entering now can lay the foundation for future growth.


Demonetization and Covid-19 are pushing cash out of India

Adapting to and succeeding in the Indian market

India’s growth potential hasn’t gone unnoticed. Global companies along with local marketplaces that include Flipkart (Walmart group company), Amazon, Jio Mart, eBay, and Tata group are fighting for a slice of the pie. Flipkart and Amazon have been very successful in India by initially building a cash-on-delivery model which suited the Indian consumer behaviour of making the payment after receiving the merchandise. Now these companies are weaning their customers to digital modes of payment. Uber facilitated 14 million rides in India in 2019, becoming the number one ridesharing platform in the country, alongside local rival Ola.

In the brick-and-mortar world, McDonalds has had a huge success, due largely to how they adapted their menu to a country where half the population is vegetarian. Fast-fashion retailers like H&M and Zara are also booming, with the former reporting that India is its fastest-growing market.

However, some international brands have failed and had to pull out of India as they did not adapt their strategy to the local culture. To succeed in India, it takes a deep appreciation of hundreds of sub-cultures and demographics. From a payment perspective, it also means understanding that local payment methods are the norm, not the exception. Therefore, offering the full range of payment modes that consumers are accustomed to alongside what are traditional payment methods in other parts of the world will be essential.

India’s unique payments ecosystem

Traditionally India has been a high-cash economy. However, in 2008, the Reserve Bank of India and Indian Banks’ Association set up the National Payments Corporation of India with the goal of migrating to a less-cash economy. The obvious replacement for cash was debit cards and since mobile phone use is so widespread, phone-based payments and eWallets. Amongst NPCI’s many payments innovations, is the widely used Unified Payment Interface (UPI), which allows users to transfer money instantly through phone numbers mapped to bank accounts.

Unified Payments Interface (UPI) allows instant payments through a variety of services, including PayTM, PhonePe, Amazon Pay, Google Pay and WhatsApp pay. The impact of UPI has been immense and in February 2021, India’s UPI system crossed 2.7 billion transactions with over 100 million users, merely 3 years after its launch. UPI now fulfils more than half of all digital transactions in the country. The Indian government is exploring launching the UPI app internationally.

RuPay, another NPCI initiative, essentially functions as an alternative to Visa and Mastercard, providing credit and debit cards, contactless payments, QR code payments and is used in nine other countries.

For international online businesses legal and regulatory restrictions can make doing business in India challenging. A thorough understanding of financial regulation and data privacy laws is required to operate here successfully.  


Smartphone usage is up among all demographics

Finding the right partners are crucial to your success

The opportunities India has to offer are huge but changing regulation and rapid developments in the digital and payments landscape can be challenging. That is why finding the right Payment Service Provider is crucial for long term success.

The Worldline Digital Commerce business in India began life as TechProcess Payment Services, a leading online payments firm headquartered in Mumbai. It is a fully self-sufficient online payments business that has developed its IT platform and owns the IP. Worldline India has a dynamic team of 1.900 employees, equipped with the local expertise to help businesses succeed in India.

Considering all the above, India is a large market, growing fast using digital technologies making it very attractive for international brands.