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Payments to Drive E-commerce in Emerging Countries

Manish Bhatia, CTO, Amazon Pay, [NASDAQ: AMZN]
Manish Bhatia, CTO, Amazon Pay, [NASDAQ: AMZN]

Manish Bhatia, CTO, Amazon Pay, [NASDAQ: AMZN]

Evaluating the right goods or services and price comparing best deals between various e-Commerce websites and retail outlets can be an exhausting exercise for customers. A typical purchase involves a customer unknowingly going through a complex decision-making process. Payment is the backbone of any transaction and usually seals the deal between the customers’ aspirations to acquire goods in exchange for their hard earned cash.

Customers in developed economies like the US and EU generally go through a simpler and cleaner online payment experience. Customers pay for a product mainly using Credit or Debit Cards. A cleaner purchase flow is a side effect of the acceptance backbone already put in place by networks like VISA, Master Card, etc. Banks were able to use the existing and ubiquitous card acceptance backbone to issue new Credit and Debit Cards to customers. This resulted in a Network effect required to broaden electronic payments reach further. 

In contrast, customers in emerging economies like India are more comfortable with cash transactions. Cash-on-Delivery (COD) is an innovative solution that enabled customers online to pay with cash for their purchases, allowing them to slowly build their trust in the platform. But Cash-on-Delivery has some serious shortcomings which result in a suboptimal customer experience at the doorstep and is relatively expensive when you add in the fully landed cost of abuse, fraud, returns, rejects and handling cash.

 Digitization and access to phones and fast internet, India is seeing a record number of people coming online to explore and shop​ 

With the exponential growth in digitization and easier access to mobile phones and fast internet, India is seeing a record number of people coming online to explore and shop. Rapid digitization and lack of ubiquitous payment acceptance network have interestingly resulted in specialized payment solutions to address specific customer pain points, and I believe India now has the problem of many ways to pay. There is no question that electronic payments are the right long-term and sustainable solution for emerging economies and online e-commerce platforms, but the customer payment experience needs some massive innovation and simplification. 

The Problem of Many: I have compartmentalized electronic payments methods into 2 broad categories, Debit and Credit to make a point. 

Debit: This generally means debiting a pre-funded account. An Indian customer can use different payment-methods like 1) Net-Banking, 2) Debit Card, 3) Unified Payment Interface also called BHIM UPI, 4) Bharat QR 5) BHIM Aadhar Pay 6) Pre Paid Instruments (PPI) accounts like GC and Wallets to deduct money from their pre-funded account and complete the transaction. All these debit related payment-methods are generally sourced from the same account. 

Credit: This generally means utilizing a pre-approved credit line from a Credit Card Account, Bank Account or NonBanking Financial Companies (NBFC) Account. Credit is enabled by using payment-methods like 1) PayLater (end of the month settlement) 2) Equal Monthly Installments (EMI) with interest 3) No-Cost Equal Monthly Installments (payment of principal only with nointerest) 4) Down Payment and other innovative flavors. 

Now throw in different authentication and authorization experiences depending on the form-factor like two-factor Authentication, entering of Mobile PIN, biometric, user-id/password or a Redirect experience to Identity providers (Banks) to complete a transaction. This can be overwhelming for customers trying to dabble with online commerce. These specific points in time were solutions devised to address a specific pain-point and enable rapid growth but are now in the way of aspiring digital customer adoption. A la carte of options is confusing customers, resulting in slower adoption and increased resistance to adopting online payments and commerce.  

Just-in-time Payment - Method Recommendations: While the Problem of Many Payment-Methods has overcomplicated the customer experience in the near-term. In the long-term, technology can dramatically simplify the customer experience with sophisticated Algorithms, Machine Learning and Artificial Intelligence (AI), by accurately predicting the best suited paymentmethod and leveraging inputs like profile, behavior and preference. Deep integration with financial institutions and networks will help get a handle on bank uptime, reliability, system availability and potential products to offer. The result will be a friction free and optimized payment experience with targeted payment-method recommendations just for you. Technology thrives in a data rich environment and the Problem of Many Payment Methods can actually be a blessing in disguise for a nascent space like payments in India. Just-in-time payment-method recommendation will help built trust in commerce and improve conversion, while keeping customer’s digital maturity and financial profile as an important input.

Payments to drive e-commerce: In 2018, India is estimated to have 337 Million people using smart phones, growing close to 16% in 2019. Also approximately 80% of Indians have a Bank Account. This creates an environment which is ripe for Payments first customers coming online mainly to transact digitally for essential High Frequency use-cases like Peer to Peer transfer, Bank Transfer, Mobile Phone Recharges and Bill Payments. These payment first customers will drive e-commerce as they get acquainted and build trust in transacting online.

Overall, India is poised to be a trendsetter in defining the best Payment Experiences for other emerging and developed economies. Stay tuned. 

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