Funding has soared in Fintech, and Web 3.0 startups along with gaming and health tech as the next big sectors in the post-pandemic world. With promises of solving real-world problems, innovation, and decentralization, India has led its way towards becoming a successful early adoptee of 5 key technologies - IoT (Internet of Things), AI and ML, blockchain, 5G telecom, and big data. 

According to Finder, a global research platform, India ranked first in terms of global crypto adoption. We are barely into the new normal and while businesses across sectors are now looking to expand their profit numbers, India is home to more than 230 Web 3.0 start-ups already, says the Cryptotech Industry in India 2021 report by NASSCOM and WazirX.

These new technologies are fast, fair and the closest they could get to the end user - a key trend that every D2C brand, be it offline or online, needs to build on. We discussed all of that and more along with a diverse panel at IReC 2022 that speaks about how the evolution of Web 3.0 in India is shaping the payment landscape in India and what that holds for the booming D2C sector. 

How can Retailers Evaluate a Suitable Payment Option?
 
Retailers have many options to enable easy payments and collections - UPI, QR Codes, PoSS, Wallets, etc. Payment touches every consumer and small business in India and with all the available options one has to give the customers the option to choose how they want to pay. What is important is how a brand prioritizes the customer so that the payment almost becomes invisible. So selection is one. 

Two, brands need to see what’s good for the customer in the context of the transaction, and the customer demographics and offer the best option to them for a seamless purchase experience. 

Vikas Bansal, Wholetime Director at Amazon Pay begins by sharing how to pick and choose the right mode of payment for the end user. “The most important metric to evaluate a suitable payment option is the conversion. How many for every hundred people who land on the website are converting? How long it takes to process a payment, the failure, and success rates. In addition to that, it’s also a more upper funnel. If there are more differentiated options for that brand or customer, how can a brand communicate that in the upper funnel and lever that to convert or bring new customers,” he said.

Adding to this, Nitya Sharma, Co-Founder & CEO, Simpl shared, “When one thinks of D2C commerce - whether physical or e-commerce, the real need for D2C is to cater to the consumers who are constantly looking for experiences. That’s the demand that we at Simpl are trying to fulfill. When we think about what is the experience of payment and when we deep dive, we realized that there’s no experience involved with payments. From the principal point of view at Simpl, we think that the vest payment experience is no experience. No one wakes up in the morning to make payments. People want to buy and in that context of buying the payment has to happen.” 

“When we thought about this problem, we fell back to the old school method of accounts which is ‘Khata’. There’s no experience when a customer is maintaining a khata with his trusted store. When we think of e-commerce or commerce in general, the question is how do we not confuse the customer about the purchase versus how to pay for it? So we separated the two - checkout is different from payments/ settlements that can happen at a later date,” he further added. 

 “I’m actually a user here and I can explain how my customers are behaving when they have to make different types of transactions. Before that, I’ll explain the landscape of Kerala Ayurveda. We are actually an omnichannel brand. We have products, academies, resorts, clinics, wellness, and spa centers. We have different payment methods like any other vendor debit/credit cards, UPI, and cash which is the lowest medium. Over a period of time, we’ve realized that for transactions with ticket sizes that are lower like a doctor consultation - say less than Rs 500 - QR Codes, UPI, Google Pay, and wallets are a popular mediums. For therapy, where the ticket sizes are higher, people use debit/ credit cards. An interesting observation has been that when it comes to making high ticket payment, say like Rs 50,000-60,000, husbands and wives discuss among themselves which credit cards to use as they can earn reward points and today those reward points can buy you a business class ticket,” added Swati Taneja, General Manager – Online Business, Kerala Ayurveda. 

What’s Next After Fintech?

With Web 3.0 spreading its wings in every sector, it’s most likely to impact and intervene with fintech - as a method of payment or as products/services and solutions. Web 3.0 is likely to foster a cluster of small businesses making it easy for them to access or distribute capital, build close and personal relations with the stakeholders of the ecosystem, scale globally while building locally and nurture relationships in the digital as well as the physical worlds. 

While explaining the future of fintech, Mohan K, Co-Founder, and CEO, IppoPay said, “We are a neo-banking service provider for offline retail businesses. There’s no innovative banking solution for offline businesses in the market. At IppoPay, we provide an end-to-end solution for retail businesses where they can have PoS software, Khata Book with Payments and UPI is our main focus to collect payments. We also provide a neo-banking solution where they can transfer the money to other retail businesses. In terms of the product side, especially payments, we want to give an end-to-end solution where they can focus on their business. In fintech, we have to solve our problems in the market. So that is the future we are seeing for our business - end-to-end solution for offline retail businesses.”

From retail grocers to marketplaces and D2C segments, everyone is excited for Web 3.0 with a few already experimenting. So where exactly are the D2C brands destined to land with Web 3.0? Well, there’s a long way to go as the cons are looking us in the eye. The rise in cyber crimes, regulatory ambiguities around crypto and blockchain, and the lack of strong and secure platforms are the roadblocks that will need to be cleared for the masses to adopt and trust the evolution of Web 2.0 to Web 3.0. 

 “So it’s still very early days when it comes to Web 3.0. Let’s talk about the problems we face today from the consumer's point of view. My data has trust issues, is it being used for unintended purposes? Second, can I get access regardless of my city and country - access to services globally? Third, can I then also make everything more instantaneous? So the basic problem is that a lot of our payments and financial services are not instant and still confined to geographical locations and misuse of data. These are the fundamental problems Web 3.0 will handle where it will put your data in your control in a decentralized fashion where the user will have access to all kinds of products, payments, and services globally. This technology will take about 2-3 years to become mainstream and like everyone else, we are also looking at it closely. It’s just the next phase of evolution which is solving problems of Web 2.0,” said Bansal.

“Fundamentally, Web 3.0 decentralizes data, insights, and control. When one compares that with the traditional mode of payments like credit cards where loyalty points are very valuable - we realize it's a very centralized world, as retailers pay a very large fee and consumers get points. These points then get exchanged for a variety of services but those points don’t benefit the retailers in any significant way,” added Sharma.

“Now let’s fast forward to the world in Web 3.0 and talk about some of the work that we are doing. We are working on loyalty rewards which will be tokens where a retailer would be able to buy a sneaker from some store, have a smooth checkout experience and then you get loyalty points from that retailer in the form of tokens. Just like Bansal said, one can always give points and cashback, but what Web 3.0 does it provide transparency to the retailer where the value that they are giving is going directly to their customer and they can track the usage of that value. We strongly believe that Web 3.0 will accelerate the trend in every sphere of line on the internet - things will become more decentralized, small retailers will be able to participate and build consumer experiences and relationships which will create both loyalty and trust,” he further explained. 

Trends Around Adoption of Payments

Most of the increased adoption of digital payments has been fueled by the pandemic - whether it’s from the consumer’s side or from the businesses. Digital payments allowed purchases to happen in a resilient and contactless or safe manner. With the physical store visits back, the behaviors are back to the pre-Covid era, the convenience however the online world is here to stay and that’s what can help brands to scale if they cover all options. 

“Definitely the consumer behaviors are different in different cities - Tier I differs from Tier II and Tier III. When we started our D2C website in 2014, we started without a COD option. The idea was to start with Tier I cities and gradually move to Tier II and Tier III cities. Thanks to Jio, internet penetration is very nice in these areas. Back then, while the traffic from Tier II and III was high, the conversions were low. So in the past  4-5 years, we’ve introduced COD for these markets and seen growth in orders as well as conversions. So this is a clear signal that people in Tier II and Tier III cities do have access to the internet, they are browsing and buying but the inhibition is around payments,” said Taneja.

Acceptance of D2C in Tier II and Tier III Markets

Brands need to build trust in these markets with education and confidence as people are not well versed with online transactions and are less tech-savvy as compared to Tier I cities. The acceptance of D2C is going up across these cities and the rural areas are up, however, people in these markets do not want to part with their money so easily. 

“Tier III and rural segments are very interesting for us. It’s not easy but difficult to scale in that market. What I believe is that with an increasing number of brands building their presence in these markets, especially D2C brands, the customer will have more options to compare and choose from. In terms of payments, what we are seeing is UPI is penetrating a lot in these markets. D2C brands should enable their collections more via UPI,” asserted Mohan K.

Going forward we will see innovation in Web 3.0 and fintech shaping the lives of Indian consumers beyond Tier I cities. The question of data security is still a vital one to answer for brands on behalf of consumers to build trust. D2C and e-commerce brands can start with COD as building trust is one of the vital milestones to achieve in the rural segments. Innovation will have to be backed up with convenience to use and education so that adoption becomes easy and penetration can scale. D2C brands will play a key role in building the payment infrastructure for the rural markets as well as consumers with the payment options they offer.