India’s Unified Payments Interface is a government-supported platform designed for peer-to-peer transactions, established in 2016. It facilitates seamless transfers between two bank accounts at minimal costs.
With 85% of India’s digital transactions now powered by UPI, driven by its 900 million mobile internet users, it’s clear that foreign ecommerce companies entering the Indian market often stick to card-based payment methods.
This discrepancy impacts conversion rates right from the start.
The widespread use of UPI means that consumers interact daily with localized digital payment options like Google Pay, Amazon Pay, PhonePe, and Paytm. From small roadside purchases to high-end shopping, UPI is the preferred payment method.
For example, residing in Chandigarh, a mid-sized Indian city, I rarely carry physical cash or cards. All transactions, including food, fuel, and school fees, are conducted through UPI on my phone, primarily by scanning QR codes or selecting the UPI option and entering my password for online purchases.
For ecommerce businesses, integrating UPI is crucial for enhancing conversion rates, building trust in their brand, and increasing customer engagement.
UPI-driven purchases are prevalent in India.
Impact on Ecommerce
Transactions via UPI are straightforward. A customer in India buys a product from a vendor offering UPI payments, and the transfer between bank accounts is almost instantaneous once the buyer syncs their UPI PIN and bank account. This eliminates the need to enter card details like numbers and CVVs.
Indians prefer UPI for its government backing, reliability, speed, and seamless experience, with lower fraud risks compared to card transactions.
India’s ecommerce market is vast, ranking among the top five globally, and is highly localized. With around 130 commercial banks in the country, each with unique UPI setups and fraud prevention measures, navigating these banking and regulatory aspects can be challenging for new sellers.
While U.S. payment gateways like Stripe support international card-based checkout, local UPI integrations are only accessible through domestic payment service providers such as Razorpay and PayU.
Additionally, India’s legal landscape includes regulations from the Reserve Bank of India, goods and services tax compliance, and data protection laws, making it challenging to operate without local expertise.
What to Prioritize
For merchants targeting the Indian market, integrating UPI into their payment systems is essential.
Local payment providers offer various solutions such as comprehensive banking services, buy-now-pay-later options, and Equated Monthly Installments. They handle foreign exchange rates, accept payments in buyers’ local currencies, and settle transactions in any global currency, including USD.
Optimizing the user checkout process for UPI and mobile platforms is another critical step. Sellers should display prices in Indian rupees to enhance familiarity and avoid suspicions of hidden currency markups.
