Technological advancements such as the Open Network for Digital Commerce (ONDC) not only provide enterprises with a platform for secure commerce but also help in efficiently meeting the credit needs of MSMEs, she says.
In an interaction with ET Digital, Nihalani talks about her views on India’s fintech ecosystem, regulatory framework, innovation, and cross-border e-commerce. Edited excerpts:
Economic Times (ET): How are changing consumer preferences amid global economic uncertainty and fast-evolving technology impacting the payments ecosystem?
Chandni Nihalani (CN): Consumers are becoming more cautious of their transactional habits in the face of global economic instability and demand for dependable, secure and transparent payment solutions, resulting in the widespread use of digital payment platforms. These consumer demands have necessitated the development of omnichannel payment solutions that enable consumers to initiate and complete transactions seamlessly across various touchpoints.
As technology adoption continues to accelerate, payment providers have the potential to offer consumers greater flexibility in their payment options. Additionally, these payment players can ensure transparency by providing clear information on any foreign exchange charges that may apply. Considering the dynamic and ever-evolving nature of the digital ecosystem, businesses in the industry need to consistently re-strategise to address the changing consumer demands while ensuring that payment experiences remain secure, convenient and seamless.ET: How is India’s fintech ecosystem shaping? How can it be further improved?CN: Factors such as the rise in smartphone usage, government initiatives such as the Digital India movement to encourage digital transactions, and a favorable regulatory environment have collectively propelled India to the forefront of the global fintech market. Digital payment platforms and digital banking services have been instrumental in promoting financial inclusion, particularly among individuals who are unbanked or underserved by traditional financial institutions.
Moreover, significant advancements led by the Open Network for Digital Commerce (ONDC) and neobanks are driving a wave of innovation. The government-backed ONDC is not only a platform for secure and interoperable commerce for enterprises, but it meets the credit needs of MSMEs by enabling data flow that will facilitate the processing of supply chain and invoicing of finance loans. Challenger banks and neobanks are breaking the barriers of traditional banking systems to offer easy-to-consume financial solutions. These innovative solutions are not only enabling fintech companies to cater to a wider audience, but are also broadening collaboration and integration possibilities for the future of fintech.
As the Indian startup ecosystem continues to contribute to the ‘Make in India for the World’ movement, providing a boost for cross-border trade through digital payments will play a crucial role. Enhancing the regulatory framework that supports the fintech industry — such as streamlining and expediting licensing processes and operating guidelines for fintech companies — can increase the rate of the industry’s development manifold. Investing in the financial literacy of India’s population and its digital infrastructure will ensure seamless nationwide adoption of fintech services across the country, including rural areas. Furthermore, establishing collaborative efforts between traditional financial institutions and fintech startups and enterprises will mark an important step towards improving India’s fintech ecosystem and driving innovation.
ET: How can digital payments boost cross-border trade?
CN: Traditionally, only large businesses could consider cross-border trade as part of their expansion strategy. Micro, small, and medium enterprises (MSMEs) had to face several dependencies like the lack of capital costs, networking, and complicated regulatory processes while considering taking their businesses global.
However, with the help of digitisation and government programmes like the Market Access Initiative (MAI) Scheme, which promotes market access for Indian MSMEs in foreign countries, and India’s inclusive foreign trade policies, MSMEs and D2C (direct-to-customer) brands have started deploying a ‘global first’ strategy. This has empowered them to expand their clientele and take their offerings beyond borders, enabled by the increasing reliance on digital payments for cross-border transactions. According to PayPal’s MSME Digital Readiness Survey, approximately 98% of MSMEs in India have shown interest in investing in additional digital payment options to enhance the purchasing experience.
When it comes to cross-border trade, ensuring a seamless experience to cater to consumers from varying geographies with their own needs is crucial. Providing a flexible payment process that makes for a hassle-free checkout, keeping in mind different currencies and local payment preferences, is where a digital payment platform comes in. In addition, enterprises are looking at digital payment platforms such as PayPal due to our robust security measures, real-time tracking of individual transactions, and transparency. Through our unique two-sided network, we connect over 35 million merchants to over 400 million consumer accounts in more than 200 markets, while also providing buyer and seller protection.
ET: What’s your take on cross border e-commerce?
CN: Cross-border e-commerce has levelled the playing field for micro, small, and medium enterprises (MSMEs), granting local business owners an opportunity to expand their operations to international consumers in a more cost-effective manner. This expansion not only enables MSMEs to scale up their businesses exponentially but also contributes to overall economic growth. With a strong focus on digital strategies, MSMEs have proactively utilised technology to enhance their online presence, particularly through social selling platforms such as Instagram and Facebook Marketplace.
ET: Does cross-border e-commerce have the potential to become a key driver of global trade?
CN: Cross-border e-commerce surely does have the potential to do so, as it provides businesses with access to a global consumer base. Consumer preferences are shifting towards online shopping and digital experiences. The convenience, extensive and diverse range of products, and competitive prices provided by cross-border e-commerce platforms are attractive to consumers who desire personalised experiences, competitive bargains, and a smooth shopping experience.
ET: How can MSMEs leverage digital payments to stay relevant and resilient amid economic uncertainty?
CN: In the post-pandemic consumer landscape, consumer demands have shifted towards variety and customisation. According to PayPal’s Borderless Commerce Report 2022, there has been an increase in opportunities for global merchants as people have become more comfortable shopping across borders. To thrive in this changing economic environment, MSMEs must seize these opportunities and adapt to stay relevant.
One crucial way for MSMEs to succeed in cross-border trade is by regularly analysing and evaluating their strategies. This enables them to identify successful approaches, address any gaps and make necessary improvements. Additionally, MSMEs can leverage social media platforms to expand their reach and engage with a broader audience. It is also important for them to regularly update and optimise their brand’s website with accurate information and appealing offerings to establish a stronger connection with potential buyers on a personal level. Furthermore, partnering with a reliable payments service provider and developing a comprehensive marketing plan can greatly assist merchants in navigating market fluctuations and maintaining stability and relevance in their business operations.
ET: How is PayPal enabling consumer loyalty for merchant partners through ease of transactions?
CN: Customers desire flexibility, dependability and security when purchasing online, and our products help our partners meet these expectations and establish trust. PayPal’s platform provides a seamless customer payment experience by reducing checkout time, accounting for preferred payment modes and currencies, real-time account updating, and access to new pricing options using advanced technologies. Moreover, our two-sided network, coupled with our credibility and experience in the payments field, have assisted our merchant partners in gaining customer loyalty.
We have made notable progress in collaborating with companies in India such as Aza Fashions, Pernia’s Pop-Up Shop and Little Muffet, among others, in the fashion segment. We are also strong partners with leading EdTechs such as Great Learning, White Hat Jr, Simplilearn and CueMath, which have witnessed increasing demand from international customers in partnership with PayPal.
