Online payments push sets up new battle lines in India

The entry of  messaging leader  WhatsApp  is poised to disrupt the digital payments business in India.  But  market leader Paytm is responding in interesting ways.
By Anand Parthasarathy
April 23, 2018: Demonetization was the  stimulus that unleashed  the digital payments   business in India.   Dozens of non-banking entities  filled the gap of  scarce currency  with easy-to-use apps  and the public embraced names like FreeCharge, Mobiwik, PayU, Paytm, PhonePe and others to ease the pain of paying for a host of services from taxi cabs to cell phone recharges to  door deliveries of meals and  groceries.

Once  cash was back in circulation,  many of these services  saw diminished  usage of their  online payment  gateways   -- but there was enough stickiness to  create  a burgeoning new  ecosystem of paperless  small payments.  And the government stepped in albeit after  some  false starts,  to create  a common platform  and regulatory framework  for all these private initiatives: the Universal Payments Interface. It also rolled out a robust  digi-pay app of its own -- Bharat Interface for Money and nudged  banking and non-banking payment solutions to  integrate with BHIM.

Within its own  hype cycle  (jargon popularised by Gartner to assess new tech trends),  digital payments in India  had  settled from a peak of expectations into a period of steady consolidation:   Global biggies signed up:  Google came on board,   with its India-specific  payment app, Tez;  Samsung Pay did likewise.

 The Facebook-owned  WhatsApp, the world's largest messaging app -- with  a 200-million plus  footprint across India,   has had many useful learnings in this country:  Unlike anywhere else, it noted, India's bottom-of-the-pyramid enterprises ( to use CK Prahlad's  memorable characterization) had  converted Whatsapp into a free and potent tool to grow their business.  If you can't fight 'em,  join 'em  -- which is exactly what WhatsApp did  a few months ago, rolling out a small  enterprise-focused avatar, WhatsApp Business a free-to-download Android app  that would make its money in other ways.

One obvious way, ofcourse,  was to  link WhatsApp to  digital payments -- and  last month, the company launched its first ever peer-to-peer digital payments service  in India, not just for business user, but for all its active Indian users.   Albeit in beta and  still putting in place  its mandatory  integration with BHIM-UPI,  the WhatsApp payment app  has gained  early traction, not least because  government voices like NITI Aayog  CEO Amitabh  Kant tweeted  instant  enthusiasm: "Just made my 1st payment through WhatsApp! It’s easy, simple, seamless & simply awesome! Will be a winner! Takes digital payments to another level!"

Incumbent  players are not about to roll over and  die:  Market leader Paytm,   has been vocal about the  structural lacunae in the WhatsApp  payment  tool and has warned that  its  owner Facebook is creating a walled garden which flies in the face of the government's UPI mandate. At the time of writing, it appears,  the National Payments Corporation of India(NCPI), nodal agency for UPI,   is working to address some of the issues and ensure that the WhatsApp payment app meets the requirements it has set for all such tools in India and does not flout any considerations of  security, in the pursuit of ease of operation.

Of the India-based e-payment solutions, Paytm  has  best managed the consolidation  post demonetization. In recent months it has averaged  around 255 million transactions, thanks to innovative tie-ups with a number of other e-commerce players.  Founder Vijay Shekhar Sharma suggests that  in the next seven years  till 2025,  India would add US $ 2.5 trillion to its economy, with the digital payments sector contributing a large chunk.   But the fact remains that  e-wallet  operations are not yet profitable  in India.  Says Prarthna Tiga, Senior Technology Analyst at GlobalData: “E-payments in India are already witnessing unprecedented growth since the government's announcement of demonetisation in late 2016. Now with the foray of WhatsApp, the country’s smaller and struggling e-payments companies fear a unique threat in an already crowded and competitive ecosystem.”

Tiga adds: "We expect consolidations to be the force in the next few years, with the bigger players focusing on opportunities to expand their footprint in India and other markets. In the meantime, smaller e-payments players are tapping into unidentified opportunities to stay relevant in the market."

Is there room in India for 60 odd   e-wallets, in the non-banking sector alone?  Possibly not --  mergers and takeovers  might  change the landscape in the months to come and while biggies like Paytm can be expect their long pockets and wide reach to  help them hold on to their chunk of the market, innovation may yet be the key differentiator.  Some of it was, in place even before WhatsApp's  "pay-day":  Six months ago Paytm  launched its own Payments Bank  and for   any Paytm user  who has already met its KYC,  the process of opening an account takes just a minute. In another  interesting  foray, Paytm joined with ICICI Bank to offer  instant short-term digital credit  - the first such tie-up between a scheduled commercial bank in India and a digipay platform.  Based on credit scores, users can avail  45 days interest-free  credit in the range Rs 3000 - Rs 10,000.    A shot across the bows of WhatsApp?
 In what seems like  the ultimate irony,  Paytm   has also   launched  'Inbox',  a messaging platform with in-chat payments. You can chat with friends and family  and also send or request money with one  tap.  If a messaging app like WhatsApp can  foray into payments, a pure pay app like Paytm can  embrace messaging and compete on its own turf!
As global  brands and local leaders  stake out their territory in India's  digital payments maidan,  the stage seems set for  some
This article was edited and  carried on the website of Swarajya monthly