Challenges of Implementing E-commerce and Online Payment Solutions in India
In some of our articles we outlined the major issues that Indian merchants face when implementing international payment solutions.
In this article we will try to explain, how a company can build a viable payment service in India. We will also outline the major problems a business can face while pursuing this objective.
We address this article to those who want to build payment services for themselves and for their customers. It is a common knowledge that demand for such innovative payment solutions at Asian markets (including India) is rather high. Reason: electronic payment handling industry in India is rapidly growing, while essential technologies and mechanisms are still unavailable. A company, providing such technologies and mechanisms would both solve an important problem and get its rightful revenue.
Popular Payment Processing Solutions for India
Multiple payment solutions are already available to Indian companies. For instance, if you are a web-hosting company, you might use such gateway services as PayUMoney or Razorpay. By the way, PayU India service offers several shopping cart platforms. And Razorpay is sometimes called “the Stripe of India”. Several large banks provide merchant and gateway services in India. They include ICICI Payseal, HDFC, Citibank, AXIS Bank.
If you are particularly interested in gateway services and e-commerce website payment solutions, then you also have several options. They include CCAvenue, EBS, DirectPay, and PayPal. If you need a local online payment service provider, you might also consider RuPay or Citrus. Still, most of available solutions are targeted primarily at merchants and, to a large extent, focused on local markets.
Prospects for Indian Platforms
New software companies, CRM platforms, PayFacs, marketplaces and shopping carts are rapidly developing in Western hemisphere. Especially, in Europe and North America. Similar companies are emerging and developing in Asia, lots of them in India. Looking at successes of their European and American counterparts, Indian companies want to come up with similar solutions.
Consequently, there is a need for respective technologies, available in Indian region. For example, Indian entrepreneurs, would like to build subscription-based services and offerings similar to Uber and AirBnB.
Indeed, many businesses would like respective solutions to be available at local markets. Moreover, many of them are willing to provide such business payment solutions to local customers. However, in order for these solutions to actually work, they need local rails, including acquiring partnerships.
In further sections we will outline the key challenges and risks an Indian platform or service provider might face.
Risks, Associated with Payment Solutions in Asian Region
As we wrote in our previous articles, payment processing is associated with multiple risks. Payment processing solution providers should effectively manage these risks. However, it is not easy to calculate and manage them. Especially, in a country with no general register of credit histories and solvency of its citizens and businesses. That is why, Indian businesses often face problems while looking for underwriting partners.
There is no universal mechanism in India, that would allow the issuing of batches of merchant accounts. There are no flexible remittance solutions, allowing businesses to manage split and chained payments involving multiple vendors. As we wrote, management of chargebacks and refunds becomes much more complicated in case of split payments.
Imagine a FinTech company that gets an opportunity to split payment amounts among multiple merchants (vendors). There is always a possibility that as a result of the split, the company might get hold of a large share of these payment amounts. Such unethical “splits” might be both accidental and deliberate. In a region like India, it would be very difficult to “follow the money” and make things right in such cases.
The aforementioned problems are, usually, solved by large acquiring banks. However, many large acquirers are not very innovative when it comes to operating at Asian markets. Most often, they provide solutions for merchants, and not for software platforms servicing these merchants. Indeed, they might have online payment pages and issue payment terminals to merchants. Still, usually, they do not have the technologies and skills for working with local FinTech companies or PayFacs. At the same time, FinTech businesses and PayFacs are the “blood vessels” of local payment services markets.
So, What’s the Problem with Implementation of Payment Solutions in India?
Many people think that the key problem of Asian markets is the lack of modern online payment processing solutions. Some say, it is lack of qualified personnel. They look for a FinTech company or a gateway solution that would allow Indian platforms to service merchants in Europe and the Americas. There is a constant flow of Indian merchants that want to accept payments in USD and Euros.
In reality, one of the key problems is the lack of respective technologies, particularly, those targeted at platforms and PayFacs.
Another key problem, specific to the Indian region, is that local merchants want to accept payments in USD. For this purpose, a merchant should be underwritten in the country where it has the USD bank account. Otherwise, this merchant would face currency conversion problems and, potentially, high cross-border transaction fees.
An Indian FinTech company, platform, or PayFac that wants to service Indian merchants and accept payments worldwide, should carefully look for suitable technical solutions.
Some white label technical solutions, such as UniPay Gateway are already available at the market. If you choose a hosted version, you can start processing in a month. Later on, you can migrate your data and operations to your local data center and license the open-source-code version of the product.
However, the key issue is the acquiring bank partnership. As you partner with the bank, you should clarify the following issues.
- Clarify underwriting rules.
- Learn, how the acquirer issues MCC codes.
- Get integration specifications.
Once these details are clear, you can integrate with a platform, described above. This move would simplify the process and reduce your time to market. Such an “algorithm” is the fastest way to having your own payment service or gateway solution.
Feel free to contact our experts for more information on the subject.