Amazon Pay sees big opportunities in small towns in India, offline payments

Amazon Pay sees big opportunities in small towns in India, offline payments

Amazon Pay India, the digital payments arm of e-commerce giant Amazon India, is aiming to make deeper inroads into offline payments this fiscal as it seeks to introduce new payment methods and enhance safety and security, CEO Vikas Bansal told Coin on Tuesday.

Amazon Pay will offer a variety of payment options, including Unified Payments Interface (UPI), credit cards and wallets, rather than specializing in one segment, he added.

“We see opportunities to penetrate deeper into offline (physical stores), various new modes of payment methods, and continue to invest in safety and security to check and reduce fraud… We continue to invest in UPI,” Bansal said on the sidelines of the launch of a report titled How urban India paysin collaboration with consultancy firm Kearney.

After Amazon Pay’s partnership with ICICI Bank Ltd for credit cards, the payments aggregator is exploring more such partnerships with banks for credit cards and also opportunities with the government’s Open Network For Digital Commerce (ONDC), Bansal said.

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With over 4.2 million users, the Amazon Pay-ICICI Bank credit card accounts for about 28% of the private bank’s entire credit card user base as of June 30. It has also introduced voice-based UPI payments through Alexa devices.

Amazon Pay has taken several steps to strengthen its payments business for both consumers and merchants. For example, the company has received a prepaid payment instruments license and a payment aggregator license from the Reserve Bank of India.

That said, Amazon’s market share in the retail payments segment in India is much lower than that of Google Pay, PhonePe and Paytm, which together control around 90% of the market.

The opportunity of a small town

Bansal also highlighted the opportunity that the growing adoption of digital payments presents in smaller cities. According to the Amazon Pay-Kearney report, 65% of transactions made by consumers in tier two and three cities were digital, and 75% in larger cities. The report is based on a sample survey of 120 Indian cities.

“It is a positive surprise that earlier there was a big gap between small towns and big metros like Mumbai. Now the gap is just 10%, which is a significant drop,” Bansal said, highlighting that the adoption of digital payments has gained momentum in tier two and three cities.

With this growth, he sees an opportunity to expand credit in small towns. “Credit uptake is less in small towns than in metros, and that’s an opportunity,” he added.

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According to the report, the growth of digital payments in India is currently being led by online channels such as e-commerce platforms. Only 10% of consumers prefer to pay with cash over offline channels such as shopping at merchants, where 52% of transactions are done in cash.

The report also found that other payment methods, such as wearables, voice assistants and buy now, pay later (BNPL) plans, are becoming increasingly popular among consumers.

“BNPL is a credit-based payment option, particularly for transactions under 5,000. It is a popular payment method, with about 87% of respondents aware of it. However, its usage is moderate, with only about 34% of respondents using it,” the report said.

According to the report, the next wave of growth in digital payments will be driven by increasing digital penetration among consumers in lower income groups and smaller cities. New payment methods such as UPI Lite and UPI Lite X should be encouraged among these consumer segments, it added.

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