Silent payment failures emerge as hidden drain on India’s D2C profits, study shows

By Puja Sharma

India’s rapidly expanding direct-to-consumer (D2C) sector may be losing revenue to an obscure yet growing payments infrastructure issue known as ‘silent payment failures,’ in which a customer’s bank account is debited but the merchant’s system does not receive confirmation of the transaction.

A recent industry study by FinTech firm Phi Commerce on digital checkout behaviour estimates that around 1.8% of digital payments fall into this reconciliation gap, particularly during high-traffic sales events when payment systems face sudden surges in transaction volumes. While the percentage may appear small, it translates into millions of transactions each month across India’s digital commerce ecosystem, creating operational complexity for merchants and finance teams trying to reconcile payments and fulfil orders.

“As D2C brands scale rapidly, the biggest risks are shifting from customer demand to payment infrastructure. Silent failures, COD returns and fragmented payment systems are emerging as hidden profit leaks for digital-first brands,” Rajesh Londhe, Co-founder and Head-Payments, Phi Commerce said.

India’s D2C market is projected to reach $120-140 billion by 2026, driven by rapid growth in online-first brands across fashion, beauty, electronics, and grocery categories. However, industry observers say operational payment challenges, including confirmation gaps, delayed settlement visibility and reconciliation delays, are emerging as critical friction points as transaction volumes increase.

The study highlights a case in which a fashion brand recorded 402 transactions during a major sale event that appeared as failed payments, but a deeper investigation later revealed that 74 of them were successful bank debits. Without verification, the merchant risked cancelling legitimate orders worth about ₹18.5 lakh, illustrating how reconciliation gaps can translate into lost revenue and customer dissatisfaction, the report noted.

Payment experts say such discrepancies often arise due to temporary bank-side delays, gateway communication issues or peak-hour congestion in payment networks. As D2C brands scale their digital storefronts and marketing campaigns, the reliability of payment infrastructure, including transaction confirmation, routing stability and automated reconciliation, is becoming a key determinant of conversion rates and operational efficiency.

Industry specialists note that resolving these failures often requires multiple layers of reconciliation between payment gateways, acquiring banks, and merchant systems, a process that can take hours or even days depending on the complexity of the transaction trail. During this time, merchants face operational uncertainty, as orders may remain in limbo while finance teams manually investigate payment logs and settlement records. For high-growth D2C brands that process thousands of daily transactions, even a small percentage of unresolved payments can create significant administrative overhead and disrupt fulfilment workflows.

As digital commerce scales further in India, payments infrastructure is increasingly being viewed not just as a backend utility but as a strategic component of the customer experience. Industry observers say that improving real-time transaction visibility, strengthening gateway-bank communication and deploying automated reconciliation tools will become critical for merchants seeking to protect margins and maintain customer trust in an increasingly competitive D2C marketplace.