India’s e-commerce sector is witnessing a seismic shift with alternative payment methods commanding a staggering 58% share of the market in 2023. Mobile and digital wallets have eclipsed traditional payment modes, reflecting a paradigmatic change in consumer preferences and transactional behavior. This dominance underscores the country’s digital revolution, propelled by burgeoning internet connectivity and a burgeoning e-commerce ecosystem, says GlobalData, a leading data and analytics company.

India’s e-commerce market is growing at a healthy pace, supported by rising internet and smartphone penetration, and growing consumer preference for online shopping – the latter coupled with increasing consumer confidence in online transactions. According to the Telecom Regulatory Authority of India, as of March 2023, there were 881.3 million internet subscribers, up from 865.9 million in December 2022.

An analysis of GlobalData’s E-Commerce Analytics reveals that India’s e-commerce market value is set to increase at a compound annual growth rate (CAGR) of 20.9% from INR12.2 trillion ($147.5 billion) in 2024 to INR26.1 trillion ($315.5 billion) in 2028.

This strong momentum is encouraging merchants, especially SMEs, to enter the ecommerce space. Many domestic and international ecommerce retailers such as Flipkart, Amazon and Myntra offer benefits, including discounts and cashback through their respective shopping events Flipkart Big Billion Days, Amazon Great Indian Sale, and Myntra Big Fashion Festival Sale.

Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, comments: “Alternative payments have gained huge traction in India since the demonetization in 2016. The COVID-19 pandemic has accelerated this trend as both consumers and merchants preferred digital payments to avoid exposing themselves to disease vectors such as cash. The growing popularity of alternative payment brands among consumers and merchants also supported this trend.”

According to the GlobalData’s 2023 Financial Services Consumer Survey*, alternative payment solutions have consistently gained popularity among the Indian consumers in the last five years with some of the popular brands being Amazon Pay, and Google Pay.

Payment cards are the second most popular e-commerce payment method in India with a share of 25.7% with credit and charge being the preferred card types, accounting for a 15.4% share in 2023.

Cash, which is widely used for in-store retail payments in India, has seen a significant drop in the market share for online purchases, accounting for only 6.2% share.

The future of e-commerce payments in India appears promising, driven by the government’s initiatives such as “Make in India” and “Startup India” and rising number of online shoppers. According to e-commerce retailer Flipkart, the online shopper base in India is anticipated to increase to 400–450 million by 2027. In 2019, the company launched an initiative called the Flipkart Samarth Program to help SMEs sell their products online. As of December 2023, the program has spread to 28 states across the country.

Sharma concludes: “The uptrend in e-commerce sales in India is likely to continue over the next few years supported by the growing consumer preference, improving payment infrastructure, and growing popularity of alternative payment solutions with these solutions dominating the ecommerce payment space over the next few years.”

*GlobalData’s 2023 Financial Services Consumer Survey was carried out in Q2 2023. Approximately 50,000 respondents aged 18+ were surveyed across 40 countries.