78% of Indian businesses open to switching payment gateways for AI capabilities: Zoho

As Indian businesses increasingly look beyond basic digital payment capabilities, 78% say they would switch their primary payment gateway if another provider offered the artificial intelligence (AI) capabilities they expect, according to Zoho’s Indian Merchant Payment Survey 2026.

The survey, which drew responses from more than 700 businesses ranging from micro, small and medium enterprises (MSMEs) to large enterprises, highlights growing demand for payment infrastructure that can improve fraud detection, reconciliation and payment success rates while integrating more closely with accounting and enterprise resource planning (ERP) systems.

“Indian businesses have moved well past asking whether digital payments work, to whether their payment infrastructure is fast, reliable and intelligent,” said Sivaramakrishnan Iswaran, CEO of Zoho Payment Technologies and Global Head of Finance and Operations BU, Zoho.

Nearly 60% of businesses surveyed are already using AI capabilities in their payment operations while another 20% are evaluating them. This leaves only about one in five businesses unaware of such capabilities, indicating that AI is emerging as an important consideration in payment-provider selection.

Fraud detection emerged as the most sought-after AI capability, followed by smart payment routing and automated reconciliation. Businesses also identified risk assessment, chargeback and dispute management, and customer insights as areas where they expect AI to add value.

Integrations influence payment-provider loyalty

Integration with existing financial systems remains a major factor in determining whether businesses stay with their payment provider. About 65% cited pre-built integrations with accounting, billing or ERP systems, along with native AI capabilities, as a key reason for remaining with their current gateway.

Integration was particularly important among medium-sized businesses with annual revenues of ₹10 crore to ₹50 crore and large enterprises with revenues exceeding ₹250 crore. Both groups identified it as the leading reason for retaining their existing provider.

At the same time, businesses cited same-day settlement as a leading reason for switching providers, followed by lower fees and merchant discount rates (MDR), and improved reconciliation and payment insights.

The findings suggest that merchants are weighing multiple factors beyond pricing, including integration, settlement speed, reconciliation and financial visibility.

The demand for faster access to funds is also evident in the survey, with 83% of businesses saying they would be willing to pay for guaranteed same-day settlement. Micro and growth-stage businesses accounted for the majority of those willing to pay for the service.

Payment failures and reconciliation remain pain points

Refund delays, payment failures and slow settlement emerged as the top three challenges in payment operations.

Payment failures were cited by 56% of respondents as a major challenge, particularly during high-traffic periods such as evening checkout hours, sales events and the end of billing cycles. Such failures can result in customer-service issues while adding to the reconciliation workload.

Reconciliation was identified as a challenge by 46% of businesses. About 61% spend between one and three hours a day on reconciliation, while nearly 20% spend three to six hours. Only 14% complete the process in less than an hour.

Businesses use multiple systems for reconciliation, including accounting software (41.5%), billing software (27.2%), ERP systems (22.8%) and spreadsheets (8%).

Fraud increases demand for payment protection

Fraud is another area driving demand for more sophisticated payment controls. Among businesses that had experienced fraud, UPI social-engineering scams were the most reported, affecting 58%, followed by false chargebacks at 37.7%, cash-on-delivery return fraud at 30% and identity fraud during customer onboarding at 16.7%.

The nature of fraud also varied across industries. About 43% of retail businesses reported false chargebacks, while 52% of manufacturers cited cash-on-delivery return fraud involving empty or damaged deliveries.

Zoho positions payments as part of broader finance workflows

Zoho said the findings reflect a shift towards payment infrastructure that combines faster processing, AI-driven capabilities and deeper integration with financial systems.

Zoho Payments is integrated with the company’s finance and operations applications, including Zoho ERP, Zoho Books and Zoho Billing, and can also connect with external financial and ERP systems.

The platform uses AI for fraud detection and prevention, bank reconciliation, revenue forecasting and anomaly detection. Its AI-driven reconciliation capabilities provide suggestions for categorising income and expenses, while revenue forecasting uses historical data to identify trends.

The company has also introduced AI agent capabilities through Zoho MCP (Model Context Protocol), allowing businesses to manage payments, payouts and refunds and extend payment workflows to AI-driven tasks.