Alternative payments methods such as mobile and digital wallets have displaced cash and cards to emerge as the most popular online payment method in India, as per the latest report by GlobalData, a data analytics and consulting company. The report highlights that alternative payment methods have completely dominated the e-commerce space in India, accounting for two-thirds of the domestic electric market in 2022.
According to GlobalData's 2022 financial services consumer survey, alternative payment solutions dominate e-commerce in India with a combined market share of 66.5% in 2022. They have consistently gained popularity among Indian consumers, doubling their share in the last five years. The results are based on the survey conducted in the second quarter of 2022 in which around 50,000 respondents (aged 18+) from 40 countries participated.
In terms of alternative payment solutions, Google Pay has overtaken Amazon Pay to become the most preferred online payment solution in India. Its market share increased from 3.5% in 2019 to 16.7% in 2022. Paytm, which heralded the alternative payments growth in India, is currently third with a 12.1% share, the report shows.
Siddharth Agarwal, Director of Financial Services at GlobalData, says, “Alternative payments have gained huge traction in India since demonetization in 2016. The Covid-19 pandemic has only accelerated this trend as both consumers and merchants now prefer digital payments to avoid exposing themselves to disease vectors such as cash.”
“Payment cards are the second most popular e-commerce payment method in India with a share of 17.5%. Credit cards, which generally dominate e-commerce payments in developed markets, have a much lower share in India due to their low penetration level,” he says.
Cash, which dominates in-store retail payments in India, has seen a significant drop in market share for online purchases. However, it is still popular among the unbanked and rural consumers with a share of 7.3%.
“The long-term trend of alternative payments replacing cash and card will continue over the next few years. With a growing number of retailers in India launching their own digital payment solutions, alternative payments are expected to continue to find favor in India,” Agarwal adds.
The report also reveals that India’s e-commerce market value is set to increase at a compound annual growth rate (CAGR) of 22.9% from ₹2.2 lakh crore ($29.5 billion) in 2017 to ₹6.2 lakh crore ($82.7 billion) in 2022, driven by an increase in internet and smartphone penetration, a rise in disposable income and growing digital literacy in the country.
The Covid-19 pandemic has further fuelled the shift from offline to online channels. As a result, India’s e-commerce payments are forecasted to grow at a CAGR of 16.1% between 2022 and 2026 to reach ₹11.2 lakh crore ($150.3 billion) in 2026, the report highlights.
Recently, a study by digital payments firm PhonePe and Boston Consulting Group (BCG) showed that India’s digital payment market is expected to more than triple to $10 trillion by 2026, with Unified Payments Interface (UPI) accounting for 73% of all digital payment volumes by FY26.