In 2015, 28% of the 4.9 billion payments processed by PayPal were made on a mobile device. Meanwhile, India currently ranks number 2 in the world with over 1 billion mobile subscriptions. Of this, approximately 240 million consumers use smartphones and this base is projected to increase to over 520 million by 2020.
Putting two and two together, it is a no-brainer that the 17-year-old digital payments giant is now taking a number of key initiatives to encourage online payments amongst merchants and customers in India’s fast evolving startup ecosystem.
With 188 million active customer accounts globally, PayPal is a payments platform that is available to people in more than 200 markets, allowing customers to get paid in more than 100 currencies, withdraw funds from their bank accounts in 57 currencies and hold balances in their PayPal accounts in 26 currencies.
But digital payments is still gaining ground in India which is primarily a cash economy and suffers from intermittency in a digital infrastructure. According to a recent report by Google and Boston Consulting Group, research has shown that 1 out of 2 non-users haven’t used digital payments because they found the product too complicated to understand and 61% of non-user merchants find it complex to use. Also, in a market like India, where regulations are still evolving, building trust in online payments remains a challenge for payment players.
The Trust Factor
While India is seeing an increasing acceptance of cross-border digital payments, building trust in online and cross-border payments is one of the key hurdles for growth. Another key issue to be tackled is related to shipping – receiving the goods paid for on time and in the way you expected.
Trust is a key concern while transacting digitally due to shipment delays and in cases when an item received is ‘Significantly Not as Defined’. This holds true for intangibles including services and digital goods. These issues are the reasons why cash on delivery continues to dominate.
Narsi Subramanian, Director, Int’l Spends & Sole Proprietors, PayPal India, spoke to Inc42 about PayPal’s initiatives to boost the uptake of digital payments and improve digital inclusion in India. Says Narsi, “At PayPal, managing risk is at the core of everything we do. We have a holistic approach towards security and fraud prevention. Our risk management solution helps to overcome the hurdles of trust and shipping. Our Enterprise Fraud Management System has been built ground up enabling us the advantage of the full range of available data for analytics. Our 188 million active customer accounts and global presence across 200 plus markets gives us a reach that empowers merchants and consumers to shop in a global marketplace.”
To remove doubts about the security of digital payments, PayPal ensures that the buyers, as well as the sellers, are safeguarded with the help of its Buyer Protection and Seller Protection programmes. Towards this, in July, PayPal announced the launch of seller protection for intangibles, an expansion of its existing seller protection program, that earlier only covered merchants selling tangible goods such as handicrafts, fashion, art, etc.
Of course, one major hurdle for the growth of digital payments is the lack of infrastructure required to facilitate digital payments. Internet connectivity is intermittent across the board. This, in many ways, leads to consumer resistance in the adoption of financial technology, something which PayPal and all digital payment players in India have to face.
Empowering Freelancers To Go Global
Freelancers are plagued with quite a few problems – the first is irregular income that continues to be one of the key challenges for this segment which is expected to solve itself as the community grows. However, the bigger challenge is that freelancers, while working with global clients, face the hurdle of providing a payment method which they can understand and trust.
In order to empower them to leverage growth opportunities beyond India, PayPal works closely with the freelancer community enabling them to transact in a safe and secure manner. PayPal’s features like invoicing and receive payment help to bridge this gap. Furthermore, its seller protection programme which covers eligible purchases for both tangibles and intangibles is a unique offering for freelancers that secures them against invalid buyer complaints.
Moreover, in case of such issues, PayPal investigates and works with the sellers to ensure that they are protected against any kind of fraud in genuine cases. This is in line with its efforts to empower them to sell their products and services in the global marketplace.
Making Payments Easy For Startups
As per the Economic Survey 2015-16, India has the third largest base of technology startup firms in the world. Given that many of the startups are run by a tech-savvy population, they look for smart payment solutions while dealing with their customers within India as well as overseas.
Being a pioneer in this space, PayPal leverages its in-depth knowledge of financial technologies and risk management of 17 years on simplifying payments by enhancing customer experience through smart technologies. The ease with which merchants can adopt its systems empowers them to focus on their product offerings. Additionally, PayPal has also enabled a simplified onboarding process to enable startup and freelancers to start transacting without delay.
In line with its efforts to bring technology to the startup community, are its efforts to actively partner and provide technology mentorship with universities, developer/startup circles, and industry bodies to share, enable and drive innovation. It also has PayPal Startup Incubator which is an outcome of its commitment to enabling the startup ecosystem in India.
Through the programme, it incubates early-stage startups with the aim of enabling them to help revolutionise and drive innovation in the industry and help entrepreneurs build platforms upon which they can grow their companies. The incubator provides an obligation-free environment for early-stage startups to evolve at its exclusive facility in PayPal’s Technology Center in Chennai.
This February, it announced the graduation of the second batch of startups incubated at the Chennai Center. The graduated companies were Konotor and PiQube. Both these companies started their incubation at Start Tank in November 2014. At the time of their graduation, PiQube raised $500K in funding from a private investment company HR Fund, while Konotor recently got acquired by software firm Freshdesk.
Speaking about the experience at the PayPal incubator, Srikrishnan Ganesan, co-founder of Konotor stated, “This tenure at PayPal has helped us with our growth as a product and a business. We were able to benefit from availing access to great infrastructure to support our business, consult with PayPal architects for technology guidance, and bring more structure to our organization growth and business metrics.”
Also, the incubator has aligned its focus around startups in the FinTech space. This means mentoring startups focussed on core payment features such as wallets, gateways, and remittances, as well as payments enablers and adjacencies like biometric authentication, security and financial inclusion. The focus is on startups which help people and organisations manage and move money with ease.
Banking On Digital India
PayPal’s focus on India, both on startups and freelancers hardly come as a surprise given India’s fast-growing ecommerce and payments market. Recently, PayPal also appointed Anupam Pahuja as the Managing Director and Country Manager for India. Anupam is a PayPal veteran and has been with the company for over six years, heading technology for APAC. Anupam will be responsible for all aspects of PayPal’s India business and further strengthen the company’s operations in India. His appointment comes on the back of the fact that India continues to be a key part of PayPal’s growth strategy.
Digital payments have become a hot turf in the Indian ecosystem. The recent Google and Boston Consulting Group reports states that the digital payments industry in India is projected to reach $500 Bn by 2020, contributing 15% to India’s GDP. Mobile-based payment solutions and proprietary payment networks will drive merchant acquisition by offering low-investment solutions, resulting in over 10 million merchant establishments that will accept digital/mobile payments. Simply put, merchant acceptance network is expected to grow 10X by 2020 with payments driving consumption and not the other way round.
Consequently, non-cash payment transactions, which today constitute 22% of all consumer payments, will overtake cash transactions by 2023.
In this dynamic scenario, it will be interesting to see how successful is PayPal in bringing into its fold the millions of Indian SMBs and entrepreneurs, who have either just opened up or will be opening up to digital payments in the near future.