By Nikunj Murukutla, Director – Sales & Ops, ZEPP
The seismic shift towards digitisation in financial transactions and the establishment of a resilient Digital Public Infrastructure (DPI) are currently driving unprecedented growth in the Indian e-commerce sector. Initiatives like the National Payments Corporation of India’s (NPCI) launch of the Unified Payments Interface (UPI), have emerged as a game-changer, simplifying transactions and extending the reach of e-commerce to previously underserved segments, especially in rural areas. Additionally, the government’s emphasis on initiatives like “India Stack” has created an interoperable digital ecosystem, seamlessly integrating digital identity, payments, and data-sharing solutions. As the nation witnesses a surge in digital payments and the adoption of DPI, businesses and consumers are experiencing newfound empowerment.
Digital payments empower inclusive transactions with increased accessibility. Platforms like UPI have revolutionised online transactions, particularly in rural areas where traditional banking infrastructure was limited traditionally. A 2023 report by a fintech company highlights a robust adoption of digital transactions in semi-urban and rural stores across the country, with transaction volumes growing by 118% and transaction values by 106% on UPI. The simplicity and accessibility of the platform have extended the reach of e-commerce to previously excluded segments, fostering financial inclusion and economic empowerment.
A Redseer report indicates that Indian consumers with an annual income between Rs 2.5 lakh and Rs 10 lakh are poised to drive nearly half of the anticipated $300 billion growth in the country’s e-commerce market by 2030. Categorised as ‘mass’ consumers, this income group is projected to contribute around $135 billion (45%) in gross merchandise value (GMV) by 2030. Additionally, the mass consumer segment is expected to play a significant role in the overall Indian retail market, contributing to $1.3 trillion. The report foresees a surge in e-commerce transactions, estimating the number of participating households to grow from 60-70 million in 2022 to 120-130 million by 2030, with mass consumers accounting for over 80% of this growth.
A new era of digital public infrastructure (DPI)
During the G20 Summit, the Digital Economy Working Group (DEWG) approved three Digital Public Infrastructure (DPI) deliverables. These include a framework for constructing DPI, mobilising finances to develop DPI in Low- and Middle-Income Countries (LMICs), and establishing a Global DPI Repository (GDPIR) for sharing information and best practices. The repository presents standardised information from countries and organisations that have implemented DPIs on a large scale, incorporating elements such as maturity scales, source codes (where available), and governance frameworks. Presently, the GDPIR showcases 54 DPIs from 16 different countries.
During the festival months, the government-backed Open Network for Digital Commerce (ONDC) experienced a surge in order volumes, registering 1.2 million transactions across 600 cities leading up to Diwali. Orders spanned various verticals, including food & beverages, grocery, electronics, fashion, home & kitchen, mobility, and health & wellness. Transaction growth during this time was attributed to buyer-side applications such as Paytm, Pincode (owned by PhonePe), Magicpin, and Ola, among others.
To understand further the potential extent of transformation via Digital Public Infrastructure, we may look at:
Unified Platforms – Initiatives like “India Stack” have laid the foundation for an interoperable digital ecosystem. Offering solutions for digital identity, payment, and data sharing, India Stack creates a seamless environment for e-commerce businesses and consumers. The use of digital records improves financial tracking for businesses, streamlining operations and fostering an environment conducive to economic growth. This unified approach simplifies processes and promotes a cohesive digital experience.
Enhanced trust and security – Standardised digital verification processes, such as Aadhaar-based eKYC (electronic Know Your Customer), play a crucial role in building trust in online transactions. The increased reliability of digital infrastructure reduces fraud risks, providing a secure environment for businesses and consumers alike.
Improved logistics and delivery – Digital infrastructure optimisation extends beyond transactions to supply chain management and last-mile delivery. With streamlined logistics processes, e-commerce platforms can ensure faster and more efficient product delivery, contributing to overall customer satisfaction.
Combined impact: Democratising, expanding, and competing globally
Government support through initiatives like Digital India and Startup India underscore the importance of digital infrastructure in fostering e-commerce growth. By focusing on infrastructure development, skill-building, and policy reforms, these initiatives create an enabling environment for businesses to thrive.
The combined influence of digital payments and DPI has democratized e-commerce, breaking down barriers to entry for both consumers and sellers. More people can now participate in online shopping, leading to a diverse and inclusive marketplace. The synergistic effect of increased access, efficient operations, and government support has significantly expanded the Indian e-commerce market. A larger consumer base and streamlined business operations make Indian e-commerce businesses more competitive on the global stage.
Navigating the road ahead
Despite remarkable progress, ensuring internet access and digital literacy in rural areas remains a crucial challenge. Bridging the digital divide is essential for sustaining and broadening the scope of e-commerce growth.
Robust data protection frameworks and responsible use of digital infrastructure are imperative to maintain consumer trust. As the digital landscape evolves, safeguarding data privacy and security becomes paramount.
Adapting to evolving technologies and consumer preferences is key to sustaining momentum in the e-commerce sector. Continuous innovation will be crucial for businesses to stay relevant and responsive to market dynamics.
In conclusion, the synergy between digital payments and digital public infrastructure has ushered in a transformative era for e-commerce in India. The democratization of online commerce, expansion of the market size, and enhanced global competitiveness underscore the profound impact of these advancements. As India continues to embrace digital transformation, addressing challenges and fostering continuous innovation will be essential to sustaining and accelerating e-commerce growth in the years to come.
