The companies are part of four consortia
preparing to apply for licenses to operate retail payments and settlement
systems in the country, people familiar with the matter said. More companies
could band together before a March 31 application deadline.
In a market where cash is still king,
digital payments are quickly gaining ground as India's 1.3 billion people are
starting to embrace online shopping and services such as online gaming and
streaming. With India's smartphone user base approaching 1 billion and Credit
Suisse Group AG predicting $1 trillion in online payments in the country in
2023, the companies chosen to enable such transactions stand to reap lucrative
commissions.
“India's mobile digital payments is seeing
huge growth in a post-pandemic world,” said Vijay Shekhar Sharma, founder and
chief executive officer of New Delhi-based payment provider Paytm. “It's a good
time to open up more diverse payments solutions and keep the momentum going.”
One of the consortia consists of Amazon,
Visa, Indian retail banks ICICI Bank and Axis Bank as well as fintech startups
Pine Labs and BillDesk. Another group is led by billionaire Mukesh Ambani's
Reliance Industries and its partners Facebook and Alphabet's Google, which
together agreed to invest more than $10 billion in Reliance's digital services
unit last year.
Sharma's Paytm heads a group that includes
ride-hailing startup Ola and at least five other companies. The fourth
consortium consists of Tata Group, Mastercard, telecom operator Bharti Airtel
and retail banks Kotak Mahindra Bank and HDFC Bank.
Sharma, a spokeswoman for Tata Group and a
spokesman for Google declined to comment on the potential bidders. Amazon and
Facebook didn't respond to emailed questions.
The contest is fierce as regulator Reserve
Bank of India is expected to give just one or two licenses, as implied in its
notification inviting bids. The process to decide the winners could take at
least six months and it could be a further year or more before the systems and
solutions come into use.
The winners will take on National Payments
Corporation of India, the sole pioneering umbrella organisation backed by more
than 50 retail banks. Its Unified Payments Interface, or UPI, protocol debuted
in 2016 and set the digital payments arena afire by allowing users to link
their phone numbers to their bank accounts. That made transferring and
receiving money via apps as easy as sending a text message, allowing large
scale and high volumes of transactions to happen at minimal cost.
“The regulator probably doesn't want
concentration risk as the UPI backbone has become critical to the economy,”
said Nandan Nilekani, who conceived and built a biometric identity database the
system uses to identify users. “With more licensees and these systems
presumably being able to operate seamlessly with each other, the aim seems to
be to reinvigorate innovation and push digital payments even deeper into the
country,” said Nilekani, co-founder and chairman of IT services company Infosys
Ltd.
Though commissions on digital payments are
thin, the volume is potentially huge as India tries to reduce its reliance on
cash. Card and mobile payments represented only 21 percent of $781 billion in
retail purchases at brick-and-mortar stores in 2019, according to an estimate
by S&P Global Market Intelligence.
The new licensees could make money by
charging businesses transaction fees. They can also break new territory by
setting up and operating ATMs, point-of-sale systems, remittance services and
new innovative payment solutions.
“There seems to be a prime mix of
regulatory support and innovation attracting investors to the space right now,”
said Anis Uzzaman, general partner and chief executive officer of Silicon
Valley-based Pegasus Tech Ventures, an investor in Robinhood and other fintech
startups. “A new generation of entrepreneurs is grabbing the opportunity.”
© Bloomberg LP
0 comments:
Post a Comment