It would be a challenge for online business, e-commerce merchants or digital services providers to manage without a payment gateway.
Payment gateways offer a range of important benefits: they do the heavy lifting to enable secure transactions to take place, helps businesses that accept credit card payments to maintain compliance, speeds up the payment process and creates a seamless checkout experience.
If you’re in the process of deciding on which payment gateway you should adopt, our article will address key questions you’re grappling with, such as: “What are key trends I need to know about the payments landscape and consumer payment behaviour in India? How do I decide on the right solution for my business, and which are the top payment gateways in India?”
- Consumer payment behaviour insights
- An introduction to payment gateways
- Leading payment gateways in India
Insights on India’s payments landscape
The potential decline of cash
Traditionally, India has been a cash-dominated society. J.P. Morgan reports that cash still takes a sizable share of India’s online payments sector, and is used in 17 per cent of all sales.
However, the country is showing signs of a shift towards cashless payments, and the use of cash is expected to decrease to take just a 10 per cent share of the online payments market by 2021. This can be attributed to regulatory changes such as the demonetisation drive in 2016, as well as the launch of payment initiatives like Unified Payments Interface (UPI) and RuPay in recent years.
The rise of digital payments
Statista data indicates that digital payments are on the rise; the total transaction value in India’s digital payment segment is expected to amount to US$ 69,168 m in 2020. Furthermore, Statista predicts an annual growth rate (CAGR 2020-2024) of 19.5%, bringing the total transaction value to US$141,256m by 2024.
Cards and digital wallets are replacing cash
According to J.P. Morgan’s 2019 Payments Trends Global Insights report, cards are currently the most popular payment method for online shopping, representing 29 per cent of transactions. There is growing adoption of digital wallets, and digital wallet use is predicted to grow at a compound annual growth rate of 80 per cent to 2021.
Mobile payments are gaining popularity
Mobile payments are gaining popularity as smartphone penetration increases in India. A joint study conducted by PwC and trade association ASSOCHAM reports that the number of smartphone users in the country is expected to reach 859 million by 2022—almost double that of the number of users in 2017 (468 million users).
Insights from a study by PayPal and Ipsos, titled ‘The mCommerce Report’ also points towards the growth of mobile payments. The majority of Indian consumers surveyed (83 percent) use a mobile device to make payment, compared to the global average of 71 percent.
Additionally, the report highlighted that 81 percent of Indian businesses are optimised to accept mobile payments, while 45 percent have indicated mobile optimisation as a priority. To respond to consumer preferences and meet the growing demand for mobile payments, businesses need to look into implementing alternative payment methods that offer consumers security and ease-of-use.
The growth of payment initiatives developed by state-owned enterprise NPCI
Unified Payments Interface (UPI) is a payment infrastructure developed by the National Payments Corporation of India (NPCI). It enables inter-bank transfers, without the need for users to enter bank details or sensitive information each time a transaction is initiated.
UPI has seen a rapid rise in the number of monthly transactions, and within three years since its launch crossed a total of one billion transactions each month in 2019. Further growth is expected; Reserve Bank of India-backed NPCI’s Chief Executive Officer Dilip Asbe indicated that UPI user base is expected to increase fivefold to 500 million by 2022.
Launched in late 2016, Bharat Interface for Money (BHIM) is a UPI-based mobile payment app. It enables users to make financial transactions—such as bank-to-bank payments and scheduled money collections—with just a payment address or mobile number. According to Statista, the total number of transactions made using BHIM amounted to over 18.4 million as of February 2020.
An introduction to payment gateways in India
What is a payment gateway?
Simply put, a payment gateway is a technology that authorises and processes payments for online businesses and e-commerce merchants. It facilitates these transactions through encrypting sensitive data, and transferring it between a bank account and the merchant’s payment portal.
How to choose the right payment gateway for your business
With a wide-ranging variety of payment solutions available in India, it can be challenging deciding on the right payment gateway to integrate. To choose the right solution for your business, you’ll need to ask yourself the following questions:
What are my customers’ preferred payment options?
Shoppers will not hesitate to abandon their shopping cart if their preferred payment methods aren’t available. According to Forbes, the cart abandonment rate increases significantly from desktop consumers (73.1%) to tablet consumers (80.7%) to mobile consumers (85.6%).
Given the rise of m-commerce in India, this highlights the importance of researching your target consumer’s shopping habits to obtain insights on their preferred payment methods. This will help you determine which payment gateways you should integrate.
Is the payment gateway compatible with my existing platform?
You need to consider the compatibility of the gateway from a technical and design perspective.
Ideally, you want to keep the look and feel of your website consistent and have the checkout page contain the same font, colours and design as the rest of your website. Not only does this make sense from a branding perspective, but consumers may feel insecure about the payment process if the checkout page differs from the website they were browsing on. And if you find that you need to spend additional time and resources to integrate a gateway into your existing structure, it’s best to reconsider your choice and look into other options.
Which payment gateway will offer the best user experience for my customers?
Consumers today desire immediacy and have come to expect a checkout experience that is swift, easy and seamless. With the right payment gateway, you’ll minimise the number of steps during the checkout process, thereby reducing the risk of drop-offs. In contrast, a less optimised payment gateway solution that involves multiple screens and steps can slow down the purchase process and create a frustrating experience for your customers.
Is this a scalable solution that will grow along with my business?
Amid a rapidly evolving fintech landscape, it’s essential that you seek out a flexible payment gateway solution that you can easily update and adapt to emerging industry trends and payment solutions.
Additionally, your provider should have a proven record in handling companies with a large volume of transactions, and you’ll need to look into how the transaction fees will change along with increases in your sales volume.
What is the most cost-effective solution for my business?
Payment gateway features and user experience are key factors of consideration—but you also need to ensure that the costs incurred per transaction do not eat into your profit margins.
This means paying attention to the details, and doing your research into the different types of fees and charges involved so that you’ll avoid the unpleasant scenario of being hit with unexpected costs. Examples of fees you need to be aware of include transaction fees, statement fees, merchant account fees, chargeback fees, setup fees and maintenance fees.
The top payment gateways in India
Cashfree offers the widest variety of payment methods, including Visa, MasterCard, Rupay, UPI, IMPS, NEFT, Paytm and other mobile wallets, various EMI options, as well as more than 70 Net Banking options.
Charging 1.75% per transaction for payments made using domestic debit and credit cards, local mobile wallets, Net Banking and UPI, Cashfree has one of the lowest transaction discount rate (TDR) charges. Payments made using international credit cards, EMI and other methods incur a charge of 3.5% + Rs. 7 per transaction. There are no maintenance or setup fees.
Cashree supports e-commerce platforms such as Magento, OpenCart, Prestashop, Shopify India, Storehippo, and WooCommerce India. The payment gateway offers easy integration into iOS and Android apps, and a settlement period of 24-hours.
Razorpay offers a standard plan that caters to startups and SMEs, as well as an enterprise plan designed for organisations with large transaction volumes.
Under the standard plan, Razorpay charges 2% per transaction for payments made using domestic debit and credit cards, local mobile wallets, Net Banking and UPI. A transaction fee of 3% is charged for payments made using international credit cards, EMI and other payment methods. There are no maintenance or setup fees. Custom pricing applies for Razopay’s enterprise plan.
Razorpay supports multiple currencies, as well as commonly used e-commerce platforms, including WordPress, WooCommerce, Prestashop, Shopify, Opencart, Magento and CS-Cart. The payment gateway offers easy integration into iOS and Android apps. Its settlement period is T+2 working days, with T being the date of transaction capture.
Paytm is a payment gateway and fintech company. The organisation has launched a diverse range of products and services, including the Paytm mobile wallet, wealth management products and online shopping platform.
Paytm charges 1.99% + taxes per transaction for payments made using domestic debit and credit cards, local mobile wallets, Net Banking and UPI. Presently, the setup and maintenance fees are being waved as part of a promotional offer.
Paytm supports e-commerce platforms and carting kits, includingWordPress, WHMCS, Magneto, Drupal Commerce, CScart, Ubercart, Opencart and more. The payment gateway provides integration kits in JSP, VB.NET, PHP, ASP.NET, Ruby On Rails and OSCommerce, and offers easy integration into iOS and Android apps. Its settlement period is between two to three working days.
MobiKwik is a digital financial services platform. The company has launched a variety of financial services and products, such as a mobile wallet, payment gateway service and DTH recharge service.
MobiKwik charges 1.90% per transaction for payments made using domestic debit and credit cards, local mobile wallets, Net Banking and UPI. A transaction fee of 2.90% is charged for payments made using international credit cards, EMI and other payment methods. There are no maintenance or setup fees. Custom pricing applies for setup and maintenance charges, as well as MobiKwik’s enterprise plan.
MobiKwik supports a wide range of e-commerce platforms and shopping cards. The payment gateway offers easy integration into iOS and Android apps, and a settlement period of two working days.
Despite its comparatively higher transaction fees, PayPal remains one of the most popular choices for international payments. It’s a widely recognised brand that consumers trust, offers advanced reporting and analytical tools and has an established presence worldwide.
PayPal charges 2.5% + Rs. 3 per transaction for payments made using domestic debit and credit cards, local mobile wallets, Net Banking and UPI. A transaction fee of between 3.4% – 4.4% is charged on payments made using international credit cards, EMI and other payment methods. An annual maintenance fee applies.
PayPal supports multiple currencies and most e-commerce platforms. The payment gateway offers easy integration into iOS and Android apps. The payment gateway offers easy integration into iOS and Android apps, and a settlement period of 24 hours.
The “lock-down” enforced due to the ongoing COVID-19 pandemic will only accelerate this shift to digital payments, facilitated by leading Payment Gateways, and with WhatsApp Pay likely to be offered soon with the Reliance Jio digital marketplace, the Indian subcontinent will witness a spurt in the development of both consumer and business fintech platforms.