India’s e-commerce market is forecast to expand by 23.8% in 2024, driven by growing consumer preference for online shopping and strong internet penetration, according to data and analytics provider GlobalData.

And at a compound annual growth rate (CAGR) of 18%, the market is expected to increase to 24.1 trillion rupees (US$292.3 billion) in 2028, from 12.2 trillion rupees this year.

As of March 2024, there were 954 million internet subscribers, up from 881 million a year earlier, figures from the Telecom Regulatory Authority of India show. This strong momentum is encouraging more merchants, especially small and medium-sized enterprises (SMEs), to enter the e-commerce space.

Many domestic and international e-commerce retailers offer benefits, including discounts and cashback on various products listed on their platforms, encouraging more consumers to shop online. These special offers are given during shopping events such Flipkart’s Big Billion Days, Amazon’s Great Indian Sale, and Myntra’s Big Fashion Festival Sale.

Among payment tools, alternative payment solutions are most preferred by online shoppers, commanding a 58% share of the market in 2023. According to GlobalData’s 2023 Financial Services Consumer Survey, mobile and digital wallets have eclipsed traditional payment modes, reflecting a paradigm change in consumer preferences and transactional behaviour.

“Alternative payment solutions have consistently gained popularity among Indian consumers in the last five years, with some of the popular brands being Amazon Pay, and Google Pay,” says Ravi Sharma, lead banking and payments analyst at GlobalData.

Cashless payments

Payment cards are the second most popular e-commerce payment method in the country, accounting for 25.7% of the market, with credit and charge being the preferred card types, accounting for a 15.4% share in 2023.

Cash, which is widely used for in-store retail payments, has seen a drop in market share for online purchases, accounting for only 6.2%.

With electronic payment methods being accepted for pay-on-delivery orders, e-commerce payments are expected to see further increase from such offerings. Flipkart, for example, offers a facility that allows shoppers to opt for QR code payments at the time of delivery using any UPI-enabled apps such as PhonePe, Google Pay, and MobiKwik.

The future of e-commerce payments in India appears promising as the number of online shoppers continues to rise. Government initiatives such as “Make in India” and “Startup India” are also driving the market. “Make in India”, for example, has enabled SMEs to expand their manufacturing capability and sell their products locally and overseas through various channels including online platforms, thereby contributing to the growth of e-commerce.

“The uptrend in e-commerce sales in India is likely to continue over the next few years, supported by the growing consumer preference, improving payment infrastructure, and growing popularity of alternative payment solutions,” Sharma says.