Zoho Survey: 78% of Indian Businesses Would Switch Payment Gateways for AI Capabilities

Posted on 19th Sep 2026 06:10:29 in Business, Digital Marketing

Tagged as: Zoho Payments, payment gateway, Indian SMEs, UPI fraud, payment reconciliation, AI in payments

Most Indian businesses no longer ask whether digital payments work. They ask whether the payment layer underneath their business is fast, reliable and intelligent enough to keep up with the way they sell. A new survey from Zoho Payments puts a number on that shift: 78% of Indian businesses said they would switch their primary payment gateway if another provider offered the AI capabilities they expect.

The finding comes from the Indian Merchant Payments Survey 2026, conducted by Zoho Payments among more than 700 businesses across India, ranging from micro and small enterprises to large corporates. The survey was fielded using Zoho Survey and covers what merchants actually want from a payment provider, where their payment operations break down, and what would make them move their money to a competing gateway.

For small business owners, the practical question is not whether to chase every new AI feature. It is which parts of the payment stack cost you hours every week, and which of the advertised capabilities would remove that cost. The survey data points to three of them.

What the Indian Merchant Payments Survey 2026 Found

The headline number is a switching signal. Nearly eight in ten respondents said a gateway offering the AI capabilities they expect could take their primary business. That is a demand signal, not a loyalty signal, and it arrives at a time when AI in payment operations is already mainstream: close to 60% of the businesses surveyed said they already use AI-driven capabilities in their payment operations, and another 20% said they are evaluating them. Only about one in five businesses said they were unaware of such capabilities altogether.

Asked which capabilities matter most, businesses ranked them in a revealing order. AI-driven fraud detection came first, followed by automated reconciliation and smart payment routing. Risk assessment, chargeback and dispute settlement, and customer insights rounded out the list. Each of those features maps directly onto a problem the same businesses reported elsewhere in the survey.

• 78% of Indian businesses would switch their primary payment gateway for the AI capabilities they expect.
• Nearly 60% already use AI capabilities in payment operations; another 20% are evaluating them.
• Fraud detection, automated reconciliation and smart payment routing are the three most wanted capabilities.
• 83% would pay a fee for guaranteed same-day settlement of their funds.

Payment Failures and Reconciliation Eat Hours Every Week

The two biggest operational complaints are unglamorous and expensive. 56% of businesses identified payment failures as a major challenge, and the survey notes these cluster in high-traffic periods: evening checkout hours, sales events and billing-cycle end dates, exactly when a failed payment turns into a support call, a lost order and extra reconciliation work.

Reconciliation is the second drain. 46% of businesses cited it as a challenge, and the time data is stark: 61% of businesses spend one to three hours every day reconciling payments, and nearly 20% spend three to six hours. Only 14% complete reconciliation in under an hour. Many businesses are doing this work across a patchwork of systems: accounting software (41.5%), billing software (27.2%), ERP systems (22.8%) and spreadsheets (8%).

Put in annual terms, a business spending two hours a day on reconciliation is spending roughly 500 hours a year on matching money to invoices. For a small firm, that is a part-time employee's worth of time spent on a task that automated reconciliation is designed to remove. It also explains why 50% of respondents named better reconciliation as a reason they would switch gateways, and why third-party research keeps returning to the same conclusion: the cost of a payment does not end when the transaction succeeds.

UPI Social Engineering Scams Top the Fraud List

Fraud is the other reason AI-driven detection ranked first. Among the businesses that reported experiencing fraud, UPI social engineering scams were by far the most commonly reported form, cited by 58% of affected businesses. False chargebacks followed at 37.7%, cash-on-delivery return fraud at 30%, and identity fraud during customer onboarding at 16.7%.

The fraud mix changes by industry, which matters when you are choosing tools. In retail, 43% of affected businesses reported false chargebacks as their main problem. Among manufacturers, 52% pointed to cash-on-delivery return fraud, where delivered shipments come back empty or damaged on online transactions. A shop selling online therefore needs chargeback dispute tooling and delivery evidence, while a business shipping goods needs COD controls and return verification at least as much as it needs a lower transaction fee.

Why Integrations Keep Merchants Loyal While Settlement Speed Makes Them Leave

When Zoho asked what would make businesses stay, the answer was not price. 65% cited pre-built integrations with accounting, billing or ERP systems that carry native AI capabilities as the main reason to remain with their current gateway. That sentiment was strongest among medium enterprises with annual revenues between Rs 10 crore and Rs 50 crore, and among large enterprises above Rs 250 crore, both of which named integration as their top reason to stay.

What makes them leave is different. 62% cited same-day settlement of funds as a switching reason, followed by lower fees or MDR at 56% and better reconciliation at 50%. The willingness to pay for speed is notable in a market where merchants are famously price-sensitive: 83% of businesses said they would pay a fee for a guaranteed same-day settlement, with micro and growth-stage enterprises forming the majority of those willing to pay.

"Indian businesses have moved well past asking whether digital payments work, to whether their payment infrastructure is fast, reliable and intelligent," said Sivaramakrishnan Iswaran, CEO of Zoho Payment Technologies. He added that businesses now expect their payment stack to be deeply connected with their financial and ERP systems.

What Small Businesses Should Check Before Switching a Payment Gateway

Survey data is only useful if it changes a decision. For an SME weighing a gateway change, the following checks follow directly from what the 700-plus respondents reported.

• Measure your reconciliation hours first. Time yourself for one week. If you are in the 61% spending one to three hours a day, automation is worth more to you than a marginal cut in transaction fees.
• Ask for settlement timing in writing. Confirm whether funds arrive same-day, next day or later, and how weekends, bank holidays and refunds are handled. 62% of businesses named this as a switch reason, and 83% would pay for a guarantee.
• Test failure rates at peak hours, not at 11 am on a Tuesday. Run transactions during your evening rush and during a sale event, and ask what the provider's failure handling and retry process looks like.
• Check integration with the systems you already run. If your invoicing, billing or accounting software does not connect cleanly, you will rebuild the reconciliation mess you were trying to escape. This is the single strongest reason businesses gave for staying put.
• Match fraud tooling to the fraud you actually face. Retail needs chargeback dispute support; manufacturers shipping goods need cash-on-delivery return verification; every business taking UPI needs protection against social engineering, the most reported fraud type in the survey.
• Read the full fee sheet, not the headline rate. Compare MDR, platform fees, refund and chargeback charges, and settlement fees on the transaction values you actually process.
• Run both gateways in parallel before you migrate. Keep your existing provider live for a fortnight, compare reconciliation output and failure reports, then move the volume.

Payments Are Becoming Part of the Back Office

The survey's wider conclusion is that merchants now judge a payment provider on everything around the transaction, not just the transaction. Money has to be matched to an invoice, recorded in accounting software, reconciled against a settlement report, protected from fraud, and tracked until it lands in the bank account.

That is why Zoho is positioning payments as embedded infrastructure rather than a standalone checkout button, wiring payment workflows into accounts receivable and payable processes across its finance suite while keeping the option to connect external accounting and ERP systems through APIs. The company has also extended payment actions such as payouts and refunds into AI-agent workflows through its own protocol support.

For India's small businesses, the takeaway is narrower and more practical. A payment gateway is no longer a utility you choose once on price and forget. It is part of your back office, and the survey shows where that back office hurts: failed payments at peak hours, hours lost to reconciliation, fraud arriving through the same UPI rails that made selling easier in the first place, and money that takes too long to reach the bank. Businesses that fix those four things - whether by switching providers or by demanding more from the one they already have - will get more out of digital payments than any headline fee cut can deliver.

Sources

• Zoho Payments Academy - Indian Merchant Payments Survey 2026 (full report)
• Zoho Corp - 78% of Indian Businesses Would Switch to Payment Gateways With AI Capabilities: Zoho Survey (press release, September 9, 2026)
• Business Today - AI becomes new battleground for payment gateways, finds Zoho survey
• Entrepreneur India - 78% of Indian Businesses Would Switch to Payment Gateways with AI Capabilities