2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - India Country Insights

INDIA INSIGHTS REPORT


At present, e-commerce in India still has considerable room for development – from basic access to the internet to innovation in its online payments offerings. However, as the state and e-commerce players ramp up investment in the industry’s underlying infrastructure, this market is set for rapid growth. To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

One of the most celebrated emerging markets, India’s economic growth has proved resilient despite the recent global slowdown. The Indian economy is expected to grow by 7.3 percent for the fiscal year 2018/19.1 Its recent economic success has been attributed to prudent fiscal policy, including the introduction of the Goods and Services Tax, and measures that have made the country more attractive to foreign investors. However, with an estimated quarter of its population living below the poverty line,2 there remains much work to do. International merchants should also be mindful of a precarious regulatory environment. The U.S. government has already expressed concern over India’s revised e-commerce regulations, which threaten to hamper the investment plans of American companies by protecting local business interests.3 That said, consumer spending via e-commerce is expected to grow at a healthy double-digit rate, buoyed by rising internet and smartphone use.

This document is based on projected figures and is subject to change at any time.

 

Huge growth predicted as internet penetration rises

 

India has the highest business to consumer e-commerce growth forecast out of all the countries included the J.P. Morgan 2019 Payments Trends – Global Insights Report series.* With a forecasted compound annual growth rate of 26.5 percent to 2021,14 this market represents a fast-growing opportunity for the e-commerce industry. India’s online shopping sector is currently worth $36.5 billion,15 a value that has consistently expanded at double-digit rates in recent years.16 Sales have been driven by a rising disposable income, increasing smartphone penetration and the marketing efforts of both brands and the government to promote online shopping.17

However, despite this prodigious growth, online shopping still only represents 2.9 percent of total Indian retail sales18 and e-commerce growth has a long way to go. The average annual per capita spend is also low, at $338.24.19 This is among the lowest spends per capita out of the countries included in our report series.20

Internet penetration is 24.6 percent,21 leaving three out of four Indians without access. The government is undertaking a series of schemes, such as ‘Digital India’ and ‘Skill India’ to improve this figure,22 and private businesses including Google are rolling out programs designed to ramp up connectivity in rural areas.23

 

Cross-border sales are a key feature of the market

 

For international e-commerce players, India is a market primed for success. Cross-border spending makes up the majority – 74 percent – of total e-commerce sales,24 as citizens seek out high-quality foreign electronics and lifestyle products, in particular.25 At present, the United States, the United Arab Emirates and Hong Kong are the top three countries from which to buy from abroad for Indian consumers.26

International businesses may also be further encouraged to engage in the Indian e-commerce market after new e-commerce regulations are instated in 2019. The government is revising the country’s privacy, data protection and international trade rules relating to e-commerce in an effort to modernize and standardize e-commerce operations.27 The government has also raised the amount of foreign direct investment allowed in the Indian business to business e-commerce market, which could improve sales and infrastructure.28

India is a world leader in app-based shopping  

 

Mobile commerce is set to become the primary way to shop online in India. It is already used for 46 percent of transactions,29 one of the highest rates in our report series.* Mobile commerce will expand at a compound annual growth rate of 31.2 percent,30 to reach a value of $49.8 billion by 2021.31

The market’s high growth potential is based on India’s existing smartphone penetration, which is low, with only 22 percent of the population owning such a device.32 Growth will also be fueled by a tech-savvy generation – the average age in India is 27.9 and more than half of its population is below the age of 25.33 Over a quarter (27.6 percent) of the population is aged 14 years or under,34 and this new wave of consumers will soon be able to buy their own mobile devices. A historical lack of domestic desktops to access the internet and the rise of cheaper smartphone devices and data plans in the country in recent years is already driving uptake.35

India stands out for its high number of app downloads, which are translating into completed e-commerce sales. India’s app store downloads grew by 165 percent between 2016 and 2018,36 and while entertainment is behind much of this growth, shopping apps are also experiencing strong growth. In-app transactions now account for 82.4 percent of all completed mobile commerce transactions.37 Offering compelling shopping apps is therefore an important step toward capturing the Indian e-shopper. The highest-ranking shopping apps include Amazon, Flipkart and Myntra.38

 

Cards and digital wallets are quickly replacing cash

 

The Indian payments market, historically dominated by cash, is evolving to meet the demands of its increasingly smartphone-led online shopping culture, with cards and digital wallets rising in prominence.

Cards are currently the most-used method for paying online, representing 29 percent of transactions, or $10.6 billion in sales.39 This is despite the fact that on a national scale card penetration is low, at 0.64 per capita for debit cards and 0.02 for credit cards.40 This suggests that cards have the opportunity to take an even larger share as the use of cash declines. Card use is expected to rise at a compound annual growth rate of 53 percent to 2021.41

Another fast-growing payment method is digital wallets, which are currently used for a quarter of all e-commerce payments.42 Digital wallet use is expected to grow at a compound annual growth rate of 80 percent to 2021,43 at which point it will be the primary online payment method, taking a 34.8 percent share of sales.44 There is a plethora of digital wallet options available in India already, with the most popular including Airtel Money and PayPal®.45

Cash still takes a significant share of the online payments market and is used in 17 percent of all sales.46 This is largely due to the longstanding popularity of cash-on-delivery methods, which enable e-commerce merchants to reach unbanked and rural customers and also reduces the risk of losses due to non-payment – if the receiver does not pay, the item is simply returned to the merchant.47 The use of cash is set to decline to take just a 10 percent of the market by 2021, as card and digital wallet adoption increases and regulatory changes spur a changing payments landscape.48

For example, the state’s demonetization of the higher-value Rs500 and Rs1000 bank notes has been designed to reduce corruption and encourage citizens to adopt digitized forms of payment.49 This has affected the number of merchants accepting cash on delivery: major players like Amazon, Flipkart and BigBasket have all limited or removed this payment option.50

As banking penetration increases, bank transfers are expected to rise quickly. Currently used for one in five e-commerce transactions, this method is expected to increase at a compound annual growth rate of 84 percent to 2021,51 to take a 30.2 percent share of the market.52

 

Fraud and chargeback rates are high in cash-heavy country

 

 

E-commerce fraud occurs in four to five percent of transactions,53 indicating that India still has some way to go to control the rate of corruption. The incoming government regulations that are designed to reduce fraud and improve data usage and storage, and increase consumer awareness, should help cut occurrences of fraud. As will the rising use of cards and digital wallets, given their anti-fraud functionalities.

 

Key takeaways

 

Given that online shopping still represents just a fraction of total Indian retail sales, and the fact that the majority of those sales are from abroad, the Indian market is hugely attractive to international merchants. Retailers are drawn to a sector that offers considerable appetite for international brands as well as few trade barriers to market entry. However, international brands should keep an eye on the Indian government’s recent focus on curbing the growth of foreign companies. While cards are currently the most popular way to pay for goods online, bank transfers and digital wallets are expected to become more popular methods of payment in India by 2021.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

* J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

 

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/country/US/en/merchant-services/payment-insights

 

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client or potential J.P. Morgan client to whom it is directly delivered and/or addressed (including subsidiaries and affiliates, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions or other business relationship and does not carry any right of publication or disclosure, in whole or in part, to any other party.  This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan.  Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan. This presentation does not constitute a commitment by any J.P. Morgan entity to extend or arrange credit or to provide any other services to Company.

In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us.  The statements, views, and opinions that will be expressed during the presentation are those of the presenters and are not endorsed by, or reflect the views or positions of, J.P. Morgan.  The information herein may not take into account individual client circumstances, objectives or needs and is not necessarily intended as a recommendation of a particular product or strategy to the Company and Company shall make its own independent decision. J.P. Morgan is not liable for decisions made or actions taken in reliance on any of the information covered during the presentation. Furthermore, J.P. Morgan makes no representations as to the actual value which may be received in connection with a transaction or use of the products and services mentioned nor the legal, tax or accounting effects of consummating a transaction.

J.P. Morgan, Chase Paymentech, Chase Merchant Services, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “J.P. Morgan”) and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the marketing name used.  Products and services may be provided by commercial bank affiliates, securities affiliates or other J.P. Morgan affiliates or entities.  In particular, securities brokerage services other than those which can be provided by commercial bank affiliates under applicable law will be provided by registered broker/dealer affiliates such as J.P. Morgan Securities LLC, J.P. Morgan Institutional Investments Inc. or by such other affiliates as may be appropriate to provide such services under applicable law.  Such securities are not deposits or other obligations of any such commercial bank, are not guaranteed by any such commercial bank and are not insured by the Federal Deposit Insurance Corporation.  Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by J.P. Morgan or its affiliates/subsidiaries.

IRS Circular 230 Disclosure:  J.P. Morgan does not provide tax advice.  Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with J.P. Morgan of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

© 2019 JPMorgan Chase & Co

1 IMF.com. India's Strong Economy Continues to Lead Global Growth, August 2018. Accessed March 2019

2 The World Bank. India profile, October 2018. Accessed March 2019.

3 Reuters.com, January 2019. ‘U.S. voices concern as India's e-commerce restrictions hit Amazon, Walmart – sources.’ Accessed March 2019.

4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2018.

6 World Bank Open Data. ‘India.’ Accessed December 2018.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2017.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2017.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank and Statista.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Reserve Bank of India.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2017.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

17 Ibef.org, December 2018. ‘E-commerce Industry in India.’ Accessed February 2019.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Foundation, 2018.

19 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

20 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

22 Export.gov, October 2018. ‘India – eCommerce.’ Accessed February 2019.

23 Ibef.org, December 2018. ‘E-commerce Industry in India.’ Accessed February 2019.

24 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Foundation.

25 Export.gov, October 2018. ‘India – eCommerce.’ Accessed February 2019.

26 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Foundation.

27 Inc42.com, February 2019. ‘Data Protection, Privacy to Form Core Of Draft Ecommerce Policy: Report.’ Accessed February 2019.

28 Inc42.com, February 2019. ‘Data Protection, Privacy to Form Core Of Draft Ecommerce Policy: Report.’ Accessed February 2019.

29 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2017.

30 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2017.

31 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

32 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista.

33 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook.

34 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook.

35 Exchange4media.com, September 2017. ‘Shift from e-commerce to m-commerce accelerating in India.’ Accessed February 2019.

36 AppAnnie.com, 2019. ‘The State of Mobile 2019.’ Accessed February 2019.

37 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Grant Thornton.

38 SimilarWeb.com, February 2019. ‘Top App Store apps in India – Shopping.’ Accessed February 2019.

39 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via data obtained from National Sources.

41 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

42 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

43 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

46 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

47 PracticalEcommerce.com, July 2018. ‘Cash on Delivery Dominates Indian Ecommerce.’ Accessed February 2019.

48 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

49 TheHinduBusinessLine.com, January 2018. ‘E-commerce players stop cash-on-delivery payment option temporarily.’ Accessed February 2019.

50 TheHinduBusinessLine.com, January 2018. ‘E-commerce players stop cash-on-delivery payment option temporarily.’ Accessed February 2019.

51 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

52 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via The Wire, ‘The Economics and Future of E-commerce Fraud in India.’