Short Answer: 2FA.
Long Answer:
India is one of the few countries in the world where Two Factor Authentication (2FA) is mandated for online payments.
2FA causes tremendous friction and increases risk of failed payments aka it makes online payments complex in India.
2FA probably stemmed from the goal to improve security and the belief that security is more important than convenience when it comes to online payments. While the goal may be noble, the belief led to unintended consequences.
As I highlighted in Why Two Factor Authentication Is A “Conversion Killer” & “Blood Pressure Booster”:
As a result of friction and risk of failed payment introduced by two factor authentication, many people including me who were using credit card for online shopping earlier switched to Cash or Card on Delivery (COD), with the result that use of cash did not decrease.
PayTM and other alternative payments emerged with innovative ways of subventing 2FA, thus increasing adoption of digital payments.
Looking at their exploding popularity, banks and regulators realized that, while it was noble, their traditional thinking “security first, convenience next” failed to resonate with the consumer behavior that people want security but only until they get it. They figured out why IMPS, the 24*7*365 Account-to-Account Real Time Payment system launched by bank consortium NPCI, met with lukewarm reception from the public. Learning their lesson, they went back to the drawing board and launched UPI.
UPI is a frictionless overlay on top of IMPS. It makes one factor implicit by moving it to the payer’s mobile phone. With some sharp implementation practices, some popular payment apps have obfuscated the second factor as well for a vast range of usage scenarios. UPI has virtually eliminated the friction inherent with direct IMPS and NEFT payments. As a result, it has garned tremendous adoption and has taken digital payments usage to new heights in India.
While online Credit Card and Debit Card payments are still inconvenient in India, online Account-to-Account payments have become more convenient in India than they were a few years ago.
While online payments are still more complex in India than other countries, I expect India to lose that dubious distinction to EU nations once EU enforces Strong Customer Authentication in the coming months. As many people, including me, have pointed out at New security measures could block one-third of online EU purchases, SCA is a train wreck waiting to happen in European Union.