India’s digital payments market is at an inflection point: Chandni Nihalani, Director, PayPal India

Around 98 per cent of MSMEs are interested to invest in more digital payment options, according to PayPal’s MSME Digital Readiness Survey


Post demonetisation, digital transactions witnessed a tremendous increase, which led to the sudden emergence of payment gateway vendors. However, the payment gateway market got a real boost during the pandemic. Meanwhile, government initiatives and digital payment trends aided MSMEs and small businesses to adopt these digital payment systems. The rise in e-commerce transactions have also added value to the various payment gateways in India. 

In a one-on-one conversation with SME Futures, Chandni Nihalani, Director, PayPal India, talks about how fast MSMEs are adopting digital payment systems such as PayPal, and why it’s crucial for MSMEs to partner with the digital payment players in the market.

Edited excerpts:

How can MSMEs compensate for the pandemic induced losses that they have endured by utilising digital payment systems? 

The pandemic created several challenges for small businesses across the world. However, they have demonstrated great resilience and have quickly adapted themselves to the business needs of the new normal. According to PayPal’s Borderless Commerce Report 2022, opportunities for global merchants increased as people started to feel more comfortable to shop beyond borders.

In India, MSMEs are the backbone of the economy, as a labour-intensive sector that helps to create jobs, empowers rural communities, and contributes significantly to the nation’s GDP (30 per cent as of FY20).

As payment systems changed overnight from cash to digital, what was once a weakness for the small enterprises has now become their biggest strength. Adopting digital payments has enabled MSMEs to improve their overall customer experience and to truly understand the value of customer data. PayPal has become a trusted brand with our two-decade old legacy technology that adds to the credibility of Indian MSMEs as they aim to target international customers. Our products empower Indian MSMEs to grow their businesses and earn customer loyalty by offering convenient, seamless, and secured payment and checkout experiences.

How has cross border e-commerce changed the game for the MSME ecosystem? 

Cross-border e-commerce has become a great equaliser for MSMEs. It gives local business owners a platform to expand their businesses to a foreign customer base, at significantly lower costs than before. It also allows them to scale their operations exponentially and support the growth of our economy. With a digital-first approach, MSMEs have proactively leveraged technology and increased their online presence with a significant increase in social selling through platforms such as Instagram and Facebook Marketplace.

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During the onset of the pandemic, we also saw an increase in the number of Indian D2C brands expanding to a global audience. According to a KPMG report, the D2C growth is interlinked with the e-commerce growth experienced during the pandemic.

CAIT, an apex body for traders, recently demanded a digital payments regulation board. Your comments on the request and, if this platform is formed, how should it operate?

The future is cashless, and India’s rapid adoption of digitalisation indicates that this future is not very far away. One of the major objectives of the government’s Digital India initiative is to achieve a “Faceless, Paperless, Cashless” status. It has already launched several initiatives towards achieving this, including the allocation of Rs 1,500 crores in the Union Budget 2023-24 for the promotion of digital payments.

In addition to the government’s efforts, it is important for the industry stakeholders to come together and work with the public sector to achieve India’s digital dream. A digital payments regulation board would not only serve as an appropriate voice of reason for the payment companies but would also provide them with a platform to address and discuss their challenges, their opportunities, and their proposals for the digital payments landscape in India.

How do you envision MSMEs further leveraging digital payments to grow their businesses beyond borders over the coming years? 

Considering the rising costs across the world, the oncoming global recession, and the changing consumer demands, creating a personalised customer experience will be crucial. We are already seeing MSMEs adopting this approach, with around 98 per cent of MSMEs in India expressing their interest to invest in more digital payment options to improve the buying experience, according to PayPal’s MSME Digital Readiness Survey.

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MSMEs can further leverage digital payments through an interoperable payments system that meets global standards and is flexible as per the needs of the customers. With customers expecting a personalised experience, having an omnichannel payment strategy is crucial. Customers are making quick decisions to move forward in their buying journeys based on the information shared with them. Businesses need to remember that each moment builds on the next one, and giving a customer a personalised experience will be recognised and welcomed.

It’s crucial for MSMEs to partner with the payment players who can help them to access the locally relevant payment methods (across countries), enable them to accept payments in multiple currencies and provide them with ease of onboarding, simple integration and a smooth post-purchase experience.

What are the targets and roadmap of PayPal for this year and what are the new initiatives that have been planned for it? 

In 2023 we are committed to continue partnering with small and medium sized businesses (across verticals) to accelerate their international growth. We have made great progress with Indian merchants in the retail and fashion sectors with brands such as Aza Fashions, Pernia’s Pop-Up Shop, Little Muffet, among others. We are studying the edtech, SaaS, and travel sectors where we have witnessed growth and a lot of demand from customers.

India’s digital payments market is at an inflection point, with digital or non-cash payments expected to constitute two out of three payment transactions by 2027. At PayPal, we will continue to empower Indian MSMEs and freelancers in their digital journeys as they expand their businesses globally, through our two-sided network and our access to 200 countries.

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