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2020 India Mobile Payments Market Report
spglobal.com/marketintelligence
Paytm differs from the rest in how it delivers financial services. It has taken a more hands-on approach by pursuing
regulatory licenses available for a nonbank, whereas others have courted partnerships with financial institutions.
Although it is conceding the lead in payments, Paytm is steadily building a bank-like platform. Thanks to its limited-
purpose banking license, the company has a direct connection to the UPI rails, accepts deposits from the public and
issues debit cards. It has brokerage licenses to distribute mutual funds and insurance policies. While the company
plans to turn into a small finance bank to make lending, according to The Times of India, it currently leverages
partnerships with nonbanking lender Clix Capital and Citibank to offer microloans and a co-branded credit card.
Clever collaboration with banks and nonbanks may help Google and PhonePe steer clear of regulation, but such an
approach also involves some limitations and risks. The unit economics of each transaction could be less favorable
for companies that need a sponsor bank integration to facilitate UPI transactions as they might share fees earned on
transactions with UPI partner banks depending on their commercial agreements.
PhonePe’s dependence on Yes Bank to access UPI rails rendered the app largely inoperative for a couple of days
in March when RBI imposed a moratorium on deposit withdrawals at the struggling bank. Paytm, through its
distribution licenses, is able to offer a wide range of mutual funds and insurance, while mutual fund and insurance
policy options on the PhonePe platform are limited. Google’s plans to offer preapproved loans in partnership with
four banks have yet to materialize.
Amazon appears to hold a middle view. While it has been active in cultivating partnerships with financial institutions
and fintechs, it has also secured regulatory licenses to offer a stored-value wallet and to distribute insurance
policies. Amazon made greater strides in facilitating unsecured credit to consumers as larger purchases on its
e-commerce platform provide lending opportunities. Its partnerships with banks and nonbanks for co-branded
cards and point-of-sale credit to consumers could help it improve payments processing costs and earn a share in
interchange revenue.
Leading mobile payment companies are also
ramping up their investments in India’s millions
of small merchant establishments. Their efforts
include digitizing ledger books of small stores,
creating digital fronts for customers to discover
them online, using small shops as ATMs to
facilitate cash withdrawals for customers and
developing visual codes for restaurants that allow
customers to scan and browse the menu and pay
for their orders. Building networks of neighborhood
stores could allow payment fintechs to explore
options of providing working capital loans.
Mounting customer acquisition costs,
modest revenues
Persuading millions of consumers, neighborhood
grocery stores and small merchants to adopt
digital payments has so far proved to be costly
for Indian payment companies that have actively
promoted the adoption of their apps through
lucrative cashback perks and discounts.
Interoperability and standardized payment
features make it easy for UPI users to shift
allegiance swiftly. As the industry remains in the
customer acquisition phase, user loyalty does not
rest only on superior payment experience, and
payment fintechs continue to offer rewards and
engage in advertising expenditure to acquire new
users and keep existing ones from abandoning
their apps.
Promotional costs rising at leading payment
companies in India
Periods represent financial years
0
5
10
15
20
25
30
35
40
Paytm PhonePe Amazon Pay Google India
Digital Services
Billions of rupees
Data compiled March 17, 2020.
Figures for Paytm represent One 97 Communications Ltd., which holds a 49%
stake in Paytm Payments Bank Ltd. Vijay Shekhar Sharma, the founder of
One 97, holds the remaining 51% in Paytm Payments Bank, which houses the
wallet and payments bank business. The wallet business was hived off as a
separate company in 2016 after Paytm secured a limited-purpose banking
license.
Figures for PhonePe, Amazon Pay and Google India Digital Services are
on a stand-alone basis and do not reflect the results of their affiliates or
subsidiaries.
Advertising promotional expenses for Google India Digital Services, which
houses Google’s UPI payments business, have been adjusted to include the
impact of cash rewards reimbursed by its parent.
Sources: S&P Global Market Intelligence; Ministry of Corporate Affairs
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