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In April this year, Amazon India rolled out a major update: Amazon Pay users can now transfer money to each other through the Unified Payments Interface (UPI), one of the most commonly used payment methods for e-commerce transactions in India. The move marks the e-commerce giant's most important recent decision in the digital payments space, as it aims to compete for a significant share of the Indian payments market.

Amazon Pay is determined to compete with big players like Alibaba, Japan's SoftBank-backed Paytm, Flipkart's PhonePe, Google Pay, and potential rivals such as WhatsApp and Reliance Jio for a slice of India's P2P microfinance market.

Globally, Amazon is highly focused on its payments business in India and has invested heavily in its India operations. The company has injected Rs 272.9 crore into its India-based Amazon Seller Services unit.

Why is Amazon India getting involved in payment services?

Four years ago, the preferred payment method for Indian consumers was cash on delivery; low penetration of credit and debit cards and spotty internet connectivity severely impacted the online shopping experience.In 2016, Amazon India partnered with QwikCilver, a gift card company, to launch a prepaid wallet that was primarily used to handle payment failures and returns/refunds.In 2017, Amazon received the licence to operate the Amazon Pay digital wallet.

This development has encouraged more consumers to opt for prepaid payment options. Now, 65%-70% of orders on Amazon's platform are prepaid, higher than the industry average of 40%.Mahendra Nerurkar, Head of Amazon Pay, Amazon India, added, "Last year, this ratio peaked at a break of 60%."

Amazon India aims to compete with Walmart-owned payment companies like Paytm and Flipkart's PhonePe for a slice of India's payments market. A robust payment service is a key tool for customer retention and access to data on their payment patterns. Amazon's payment service already has partnerships with several large Indian retailers, including online food delivery platform Swiggy, online ticketing service BookMyShow, train ticket sales site Cleartrip, online pharmacy Netmeds, and utility bill payments.

Vikas Bansal, head of Amazon's Pay business, is tying Amazon co-branded credit cards, instant instalments and current P2P transaction services to the Unified Payments Interface to provide consumers with more payment options and ease of shopping on the Amazon platform.

Bansal said that this approach is designed to cater for the diverse needs of different user groups. The platform remains focused on consumer quality and discourages buyers who randomly switch platforms in search of discounts.

"A recent survey shows that consumers are willing to share data with companies for a better payment experience. Therefore, supporting a variety of payment tools is crucial for e-commerce giants like Amazon." Arnav Gupta, digital payments research analyst at Forrester, said, "Consumer data not only reflects their shopping patterns, but also helps Amazon work with merchants on things like loans and product inventory."

Amazon is expanding its offline business through QR codes. At the same time, it is secretly partnering with Indian payment solutions provider Tone Tag, which received an investment from Amazon to speed up the payment process in brick-and-mortar shops. The report states, "By integrating Amazon and Tone Tag technology, consumers can transfer payments to Starbucks coffee shops or other offline merchants directly from the Amazon app. This not only simplifies the payment process, but also helps the platform collect data on consumer spending habits."

From these ongoing strategies, it is clear that Amazon is determined to capture the Indian payments market. However, it has to overcome several major challenges. Firstly, Amazon needs to guide its wallet users through the KYC (Know Your Customer) norms, otherwise these wallets will become unusable after September. Secondly, the authentication process on Amazon's platform needs to be revised as users are unhappy with it.

At the same time, there are those who think Amazon is entering the digital payments space a little late. "Google Pay and PhonePe are the most competitive in the UPI payments market by a wide margin. Catching up with these established payment companies is a daunting task." An Amazon executive said. (Source: economictimes)

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