India has long been a non-allied country. Amidst rising Sino-American tech competition, India's policy has not changed. It leans towards neither Washington nor Beijing. As India's digital payments sector surges, Chinese and U.S. tech investors shut out from each other's markets are instead competing intensely on the subcontinent. Consolidation will occur as India's digital payments market matures, as it did in the e-commerce, ride-sharing and food-delivery segments, analysts say.
India has one of Asia's most vibrant fintech ecosystems, highlighted by payments unicorn Paytm with a valuation of US$10 billion. In the first quarter of the year, the subcontinent attracted the most VC fintech investment of any country in Asia, beating out digital finance juggernaut China.
Given the excitement surrounding India's fintech scene, it is easy to overlook cash's continued paramountcy in the Indian economy, accounting for 95% of transactions. Indeed, cash not only remains the primary payment method in India, its use is growing. The reason is straightforward: Cash is convenient - especially considering India's large informal economy. The fintech ecosystem must penetrate far deeper into the Indian economy before it can begin to displace cash.
WhatsApp has moved one step closer to launching its payment business in India by setting up local data storage facilities, according to India's The Economic Times. As a condition of market entry, the Reserve Bank of India (RBI) requires digital payment providers to first set up local data storage facilities and then submit an audit report to the central bank. Market insiders say that WhatsApp Payments is expected to go live with its Unified Payments Interface-based service with ICICI Bank. Services through Axis Bank, HDFC Bank and SBI are likely to follow, they say.
Paytm’s payments bank (PPB) has become India's first profitable business of its kind, posting a net profit of Rs19 crore ($2.7 million) in fiscal year 2018-19. PPB says that it accounts for nearly a third of all mobile banking transactions in India and processes over Rs3 lakh crore worth of digital transactions per year, second only to India's top lender State Bank of India. With over Rs 500 crore deposits in its savings account, PPB is the top payments bank in India in terms of deposits.
India's fintech giants Paytm and Ola are both entering the credit-card business, a move that should boost cashless transactions in an ascendant payments market estimated to reach $1 trillion by 2023. Digital wallet Paytm is cooperating with Citibank while ride-hailing juggernaut Ola is working with State Bank of India and Visa. Credit cards could offer Paytm a way to better compete with the U.S. tech giants who recently entered India's payments segment. For Ola, credit cards are a new way to generate revenue from its huge userbase. Visa and SBI hope to tap Ola's massive userbase to grow their own customer pool.
Ironically, both fintech giants are turning to a traditional financial platform to grow their businesses. Perhaps there is some truth after all to bromides about how financial incumbents and upstarts have more reasons to work together than compete with each other.
Facebook is reportedly developing a cryptocurrency that will be backed by the U.S. dollar for the Indian remittances market. Known as a "stablecoin," the digital currency will allow users of Facebook's WhatsApp messaging app to transfer money. Stablecoins have many applications besides remittance, including peer-to-peer payments, the purchase of goods and services online, and trading of digital currency. Facebook's digital currency is at a nascent stage and won't be released for some time, according to a December Bloomberg report.
Previously, WeChat has been the world's dominant chat & payment app with over 1 billion WeChat users worldwide, spread over 15 countries; 200 million of which use the app's payment function. Could WhatsApp's December 2017 release of a payment enabled WhatsApp app in India find similar success?
Hike messenger, a popular phone messaging service app in India, has recently decided to introduce payment services on its platform.
The RuPay is an initiative by the National Payments Corporation of India (NPCI). It is intended to provide a domestic alternative to the global MasterCard and Visa card payment systems. It will also allow NPCI to consolidate various payment systems in India. It is directly comparable to its Chinese counterpart, China UnionPay, which has been highly successful and is a world leader in payment systems.
Indian messaging app Hike raised $175 million in funding from global investors this month. This round of funding valued the messaging app at $1.4 billion, cementing Hike's entry into India's coveted "tech unicorn" club. Even so, it was one of Hike's new shareholders that lifted more eyebrows. Tencent, the owner of WeChat and China's most popular messaging app, were among the investors throwing their bets behind Hike. Kapronasia takes a look at possible advantages of this new relationship.
Global payments operator Fortumo and India’s Reliance Communications (RCOM) have launched direct carrier billing where RCOM’s customers can purchase digital content and games by charging the payments to their mobile bill or mobile prepaid account. Reliance customers can now enjoy a host of digital entertainment content on the move on their mobile devices, across movies, music, games and live TV, starting from just Rs. 10 (15 cents) for 1 day of access, all by paying through their mobile postpaid bill and mobile prepaid account.
As a growing number of foreign banks wind up operations in India, IT companies’ revenues from BFSI are growing slower than ever (21% in 2015 vs a projected 10% for 2016). Most IT majors derive a significant portion of their revenues from banking and insurance sectors - as high as 40% in some companies. However, this situation could improve with 'Payments Banks' (PB) set to roll out in the third quarter of 2016.
The pie of banking services in India is well spread out amongst various types of banks, ranging from private sector, public sector, foreign banks, rural banks and even cooperatives. However, market forces are starting to whittle down the once varied field of payment service providers (PSPs), and it is starting to look more like a two horse race similar to other e-commerce markets in Asia.
The financial services sector in India is at it again; at least the regulators and the mainstream business publications are. Talking up UPI (Unified Payments Interface) as a panacea for India’s challenges with financial inclusion, cash economy (read black money), plateauing digital ecosystem and you name it.