A recent survey by Zoho, focusing on Indian merchant payments, highlights a significant shift in business expectations from payment gateway providers. The 2026 survey, which gathered insights from over 700 businesses ranging from MSMEs to large enterprises, indicates that artificial intelligence (AI) is rapidly becoming a critical differentiator in the competitive payment processing landscape.
AI Drives Gateway Switching Decisions
A striking 78% of Indian businesses stated their willingness to switch their primary payment gateway if another provider offered the AI capabilities they now expect. This finding underscores the growing demand for intelligent payment infrastructure.
- Nearly 60% of businesses are already utilizing AI in their payment operations.
- Another 20% are actively evaluating AI integration.
The most sought-after AI features include:
- AI-driven fraud detection (top priority)
- Automated reconciliation
- Smart payment routing
- Enhanced risk assessment
- Improved chargeback and dispute management
- Deeper customer insights
Addressing Operational Pain Points with AI
Businesses are facing persistent operational challenges that AI is expected to alleviate. Payment failures were identified as a major issue by 56% of respondents, while 46% cited difficulties with reconciliation.
The burden of manual reconciliation is substantial:
- 61% of businesses spend one to three hours daily on reconciliation.
- Nearly 20% dedicate three to six hours daily.
- Only 14% manage to complete reconciliation in less than an hour.
Fraud is another significant pressure point. Among businesses reporting fraud, UPI social engineering scams were the most common, followed by false chargebacks, cash-on-delivery return fraud, and identity fraud during customer onboarding.
Sivaramakrishnan Iswaran, CEO of Zoho Payment Technologies and Global Head of Finance and Operations BU, Zoho, commented on this evolution: "The Indian business has moved well past asking whether digital payments work, to whether their payment infrastructure is fast, reliable and intelligent."
Beyond AI: Other Key Factors for Merchants
While AI is a dominant factor, other elements also influence a business's choice of payment provider:
- Same-day settlement: Cited by 62% as a reason to switch. Notably, 83% of respondents, particularly micro and growth-stage enterprises, expressed willingness to pay a fee for guaranteed same-day settlement.
- Lower fees or MDR (Merchant Discount Rate): Important for 56% of businesses.
- Better reconciliation features: A motivator for 50%.
Conversely, 65% of businesses indicated that pre-built integrations with their existing accounting, billing, or ERP systems, especially those with native AI capabilities, were the primary reason to remain with their current gateway.
This comprehensive view suggests that the payment gateway market is evolving beyond basic transaction processing. Providers are now being evaluated on their ability to offer an AI-led financial operating layer that can detect fraud, minimize failures, automate reconciliation, and seamlessly integrate with a merchant's broader financial ecosystem.