Alternative payments methods such as mobile and digital wallets completely dominate the e-commerce space in India. They have displaced cash and cards to emerge as the most popular online payment method, accounting for two-thirds of India’s e-commerce market in 2022, finds GlobalData, a leading data and analytics company.

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 22.9% from INR2.2 trillion ($29.5 billion) in 2017 to INR6.2 trillion ($82.7 billion) in 2022, driven by an increase in internet and smartphone penetration, a rise in disposable income and growing digital literacy in the country.

The COVID-19 pandemic has accelerated the shift from offline to online channels. As a result, e-commerce payments in India are forecast to grow at a CAGR of 16.1% between 2022 and 2026 to reach INR11.2 trillion ($150.3 billion) in 2026.

According to the GlobalData’s 2022 Financial Services Consumer Survey*, alternative payment solutions dominate e-commerce in India with a combined market share of 66.5% in 2022. They have consistently gained popularity among Indian consumers, doubling their share in the last five years.

Siddharth Agarwal, Director of Financial Services at GlobalData, comments: “Alternative payments have gained huge traction in India since demonetization in 2016. The COVID-19 pandemic has only accelerated this trend as both consumers and merchants now prefer digital payments to avoid exposing themselves to disease vectors such as cash.”

Among the alternative payment solutions, Google Pay has overtaken Amazon Pay to become the most preferred online payment solution in India. Its market share increased from 3.5% in 2019 to 16.7% in 2022. Paytm, which heralded the alternative payments growth in India, is currently third with a 12.1% share.

Agarwal adds: “Payment cards are the second most popular e-commerce payment method in India with a share of 17.5%. Credit cards, which generally dominate e-commerce payments in developed markets, have a much lower share in India due to their low penetration level.”

Cash, which dominates in-store retail payments in India, has seen a significant drop in market share for online purchases. However, it is still popular among the unbanked and rural consumers with a share of 7.3%.

Agarwal concludes: “The long-term trend of alternative payments replacing cash and card will continue over the next few years. With a growing number of retailers in India launching their own digital payment solutions, alternative payments are expected to continue to find favor in India.”

*GlobalData’s 2022 Financial Services Consumer Survey was carried out in Q2 2022. Approximately 50,000 respondents aged 18+ were surveyed across 40 countries.