While India’s retail trade is still dominated by cash transactions, growth in online payments continues to outpace growth in other payment methods. At present, online payments constitute 4.5% of the total value of card payments, a proportion that is likely to grow to around to 10% by 2017.
Online payments now represent one of the key drivers for the increase in payment cards in circulation and their usage. "The high growth in internet penetration, coupled with a number of other factors , has driven growth in e-commerce and also growth in number of payment cards in issue and their usage," says Timetric analyst Vladimir Vukicevic.
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Currently, 14 out of 100 Indians use the internet. However, only around 6% of India’s 150m internet users buy goods online and there is a huge potential for increase in e-commerce. "Although cash on delivery is emerging as a preferred mode of payment for online shopping in India, credit and debit cards feature most online payments due to promotional offers, such as discounts and coupons, offered by credit card and debit card issuers such as Citibank, HSBC and HDFC" suggests Timetric’s new report.
Therefore, the growing market for e-commerce in India is one of the factors behind the expansion of the country’s card payments channel. According to the Timetric report, other factors driving growth in e-commerce include the removal of barriers for entry of foreign retailers and rising competition among telecommunications service providers. "A recent government initiative to open retail market doors to foreign investments is expected to increase the portion of organised retail formats with card acceptance infrastructure", continues Vukicevic.
The Reserve Bank of India has also made its own contribution to the growing e-commerce business to encourage the debit card payments for online purchases in 2012, when it cut interchange fees[v3] from 1.8% to a maximum of 1%. "As a result of the evolving trade environment benefits available to online retailers, they are now driving an increase in credit card and debit card ownership and their usage," adds Vukicevic.
The Timetric report: ‘Emerging Opportunities in India’s Cards and Payments Industry’ was published on the 20th May 2013.
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About Timetric
Timetric is a leading provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and commentary.
