Sebastián Kanovich, is the CEO and founder of dLocal, and will be writing on e-commerce and digital transformation of the payments landscape in India;
“Thanks to India’s young, mobile-connected population and the progressive thinking of political leaders, e-commerce is a hot commodity throughout the region with the market growing at an unprecedented rate. For investors and payment providers, these opportunities will continue to flourish, with reports indicating that the number of digital buyers in Asia Pacific is projected to pass one billion for the first time in 2018, and estimated to hit $200 billion in gross merchandise value by 2026.
Despite the country having the second largest population of internet users in the world,  India’s undocumented citizens had limited access to public services and the global internet market – in 2011 only 10% of India’s population could access internet services. These restrictions and an uptake of mobile devices by millennial users inspired an initiative to provide biometric-based ID system for citizens.
In a bold step towards India’s digitalization, the government rolled out Aadhaar – an ambitious plan to give every citizen a 12-digit digital identity authenticated by finger prints and retina scans, regardless of their socioeconomic status. By the end of 2017, nearly 100% of the population was registered with Aadhaar. With cardholders eligible to open instant mobile phone accounts, the country brought nearly 400 million users online in just a few years.
However in its infancy, Aadhaar didn’t have a strong impact on e-commerce in India, as privacy issues concerned many first-time online and mobile users. Arguably, the growth and emergence of India’s largest homegrown e-commerce giant, Flipkart, as well as Myntra and Jabong as early players helped shape the future of online retailing in the country. This past year alone, Flipkart and Amazon India accounted for around 80% of total online sales – with Flipkart taking 50% of the share.
Several other influential initiatives have helped pave the way in solidifying the nation’s status as an e-commerce powerhouse. As early as 2009, work began on modernizing the country’s payments infrastructure through the National Payments Corporation of India (NPCI), allowing all Indian citizens to have unrestricted access to e-payment services through products such as the Unified Payments Interface (UPI), Bharat Bill Payment System (BBPS) and National Electronic Toll Collection (NETC). Additionally, Prime Minister Narendra Modi’s 2015 “Digital India” campaign helped provide universal internet access to those in rural access, with the overarching goal of empowering citizens with digital resources. In 2016, the radical demonetization of 86% of India’s currency arguably acted as the final catalyst to propagate India’s citizens into the digital and financial mainstream as a ‘less cash’ society.
Implementation, maintenance and promotion of these key initiatives have led the nation to leap over several generations of tech development and create a dynamic, mobile-based e-commerce market. India’s millennials, who account for a third of nation’s population, and 46% of its workforce, are driving this economic and technological transformation. India’s millennial population is booming – surpassing both the U.S. and UK combined. The smartphone penetration rate is steadily increasing, with 39% of the population expected to own a smartphone by 2019 compared to 21% in 2014. Additionally, the roll-out of Reliance Jio in 2016 brought about a “digital tsunami” in the Indian Telecom Industry, which brought cheap 4G data to the masses, vastly improving online accessibility. Aadhaar played a key role in this transition, with Aadhaar eKYC mandatory for immediate SIM card activation.
The digital demands of an increasingly tech-savvy nation are converging with the government’s goal to provide universally accessible financial services, creating limitless cross-border opportunities for electronic payment providers. Indeed, with many internet-based companies like Uber and AirBnb mandating the use of Aadhaar to use their services, the government of India has upped security features by allowing face recognition along with biometrics as a means of authentication.
The transformation of India’s marketplace shows no sign of slowing down and the retail industry is particularly by the storm. By 2019, e-commerce will account for nearly 5% of all retail sales in India – increasing fourfold since 2014. Overall, India’s economy is set to grow into the world’s third-largest economy with a GDP of $6 trillion by 2027. With retail giants such as Flipkart expanding their supply chain to reach Tier-II and Tier-III cities in India, a large segment of new customers is getting incentivized to buy things online.
With India on track to become a trillion-dollar digital economy, merchants and brands with global interests can play a profitable role in India’s unbanked fintech revolution. In 2016 alone, two thirds of online shoppers completed a cross border transaction online. As India’s population becomes increasingly internet savvy, their comfort with cross-border purchasing only increase offering an opportunity to serve the needs of both brand conscious and value-driven consumers.
Because digital transformation in India is ongoing, the payments landscape is likely to continue evolving at least for the next decade. To realize their full potential in India, online retailers, marketplaces, travel and hospitality companies or any other global e-commerce players must be agile and adaptable to the changing conditions around payment acceptance and disbursement. For example, payment on delivery, which was a popular payment option for online retailers, seems to be on the steady decline. Also, there are some constraints around e-wallets – current regulations (as of October 2017) allow wallets to undertake cross-border inward remittances, but wallets need to be fully KYC compliant and issuers can enable this facility only on explicit request of the customers.  Lastly, until recently, merchants who wanted to sell in India and accept local payment methods had operate a local subsidiary. That is no longer the case. Global companies can now partner with third party providers (such as dLocal, the company where I work) to manage all local payment operations on their behalf.
More than ever before India’s net-savvy consumer base are seeking more options and access to a wider scope of brands, products and services, and many global merchants are taking notice. The ability to adapt and maneuver through the inevitable wave of changes in purchasing habits, regulation, local processors and payment types is what will separate leaders from the rest of the pack.”
About Sebastián Kanovich
Sebastián Kanovich is a pioneer in emerging markets payments. He spun off dLocal from AstroPay in January 2016, creating a payments technology company which eliminates operational hurdles that hinder e-commerce expansion into emerging markets. Prior to dLocal, as the CEO of AstroPay, he grew the company into a premier payment-card provider that processed millions of transactions daily, winning recognition by Forbes as the top Fintech Startup to Watch. Sebastián studied Economics, Entrepreneurship & Innovation, and Management of Technology Business at Tel Aviv University and completed a prestigious Endeavor Innovation and Growth Program at Stanford Graduate College of Business. He continues to be fascinated with how payments work around the world.
 Statista E-Commerce in India
 Morgan Stanley India’s Digital Future
 Statista Countries with highest number of internet users
 The Guardian 1.2bn population of India to be given biometric ID cards
 Economic Times ET Awards 2012-13: How IIT-alumnus Sachin Bansal built Flipkart into a big online brand
 Economic Times Flipkart again beats Amazon in festive season sale
 National Payments Corporation of India Who We Are
 Digital India About
 Social Chain More Millennials In India Than The US & UK Combined
 Economic Times Citizens hesitant to link Aadhaar details with e-commerce, digital wallets
 Times of India Now, face recognition to authenticate Aadhaar, but with biometrics or OTP
 The Hindu India GDP to hit $6 trillion by 2027: Morgan Stanley report
 Economic Times Flipkart draws up plans to booth growth in tier-II cities
 Pitney Bowes Inside the Mind of the Global Consumer