Indians fast turning to e-payments

INDIA--The retail e-payment market in the country is set to reach US$150 billion by 2010, riding on the back of tech-savvy Internet and mobile phone users.

Nilaya Varma, associate director, PricewaterhouseCoopers, said: "Earlier, Indians were circumspect about using e-payment as they were comfortable paying in cash and through checks." Moreover, Internet access was expensive and not available everywhere.

"Today, the proliferation of telecommunications networks and mobile phones has filled this gap," Varma told ZDNet Asia in an e-mail interview.

As a result, India's retail e-payment market is likely to grow by nearly 70 percent in the next two years. The value of retail e-payments should reach between US$150 billion and US$180 billion by 2010, according to a report by financial research and consulting firm Celent.

Prathima Rajan, analyst, Celent, said: "Ever-increasing technological changes, growing Internet access and mobile subscriber base, rising consumer confidence, and convenient delivery and payment models are the prime factors fueling this trend."

However, despite the high growth, customer adoption of electronic payment channels in India is still at a nascent stage, Rajan told ZDNet Asia in an e-mail interview.

Growing popularity of e-payments is also reflected in the market for plastic money. According to Celent, the Indian debit and credit card market grew at a compounded annual rate of 128.7 percent between 2004 and 2008 and is expected to reach 210 million cards by 2010.

The report expects debit card circulation to increase to 169 million by 2010, up from 102.4 million today, while credit cards should increase from 27.5 million to 40 million during the same period.

Mario Shiliashki, general manager, PayPal South East Asia and India, told ZDNet Asia in an e-mail: "E-payments are growing in popularity across the globe and India is no exception."

PayPal is increasingly being used in India for cross-border trade through e-commerce sites for the sale of gemstones, jewelry, electronics and household items and for services such as Web design, travel and digital content.

Youth triggering faster adoption
With 75 percent of its population below the age of 35, e-payments have enormous potential in India.

"Young consumers who grew up with technology are coming of age and have their own bank accounts and mobile devices," Shiliashki said. These young consumers expect services to be mobile, 24-by-7 and at their fingertips. "It is this expectation that is driving businesses to enter the online space."

According to Rajan, a large chunk of online bill payments come from customers in the age group of 18 to 25 years. "They contribute nearly 46 percent of total online bill payments," she said.

In 2007, India's apex bank--the Reserve Bank of India--passed the Payments and Settlement Act to ensure security of electronic payments. Besides this, awareness and educational campaigns carried out by banks have also helped consumers in switching over to electronic payments.

According to a recent study undertaken by The Nielsen Company, Indians are growing more confident about shopping online with 78 percent of respondents (Internet users) having made an online purchase at some point.

The proliferation of mobile phones too has played catalyst to the growth of e-commerce. In terms of mobile subscriptions, India is the world's second-largest wireless market after China. Currently, there are 261 million mobile subscribers, including 73 million rural mobile users. And the current mobile penetration of 36 percent leaves a lot of potential for growth.

Rajan said: "Every bank and financial institution wants to be part of this bandwagon by offering mobile banking services to its customers."

The travel industry too has witnessed a lot of activity in the area of e-payments.

According to a survey undertaken by market research company eMarketer, India's online travel market is predicted to grow by 46 percent per annum between 2007 and 2011 and generate earnings of US$4 billion by 2011.

Rural India, however, is grossly divorced from the stupendous growth rates being experienced in the e-payments industry. It is a vast, untapped market. However, the customer base is equally challenging.

Rajan said: "Addressing the unbanked illiterate population is a big challenge and so are barriers like technology, connectivity, electricity and the availability of right kind of services for rural India."

However, PayPal's Shiliashki is of the view that if the government achieves its goal of reaching 20 million broadband users by 2010, a greater usage of the Internet and increased familiarity with the opportunities it brings along will result in wider local adoption of e-commerce in India.

Fighting off security threats
Meanwhile, the rapid growth of online commerce has led to ever-increasing sophistication in Internet fraud, such as phishing to fraudulently acquire sensitive information such as usernames, passwords and credit card details; pharming attacks that redirect a Web site's traffic to bogus site; Trojans; key logging to retrieve online password entries; and proxy attacks.

Shailender Kumar, vice president, Oracle Fusion Middleware, Oracle India, told ZDNet Asia in an e-mail interview: "To thwart hackers, banks are adopting stringent levels of login procedures that are more personalized and secure."

Various measures taken by banks have bolstered consumer confidence. Some of these measures include the introduction of additional levels of passwords, personalized background image for login and virtual keyboards.

Oracle introduced Oracle Adaptive Access Manager (OAAM), an identity management product that provides banks with proactive, real time and offline context aware risk assessment, making online transactions a lot more secure. OAAM generates alerts to detect anomalies in any particular transaction and takes corrective actions.

Swati Prasad is a freelance IT writer based in India.