India’s own Unified Payments Interface meets increasing approval as it aims to safeguard fair online competition in a world of global digital giants.
Doing Online Payments Differently
In a year defined by Covid-19 limitations, inevitably, most of us ended up relying increasingly on online services, e-merchants and digital entertainment. India is a country with more than 500 million active internet users, a hugely appealing market for big and small online businesses alike. In the end, however, digital payments tend to be processed by a few select companies.
Industry reports have been pointing out, however, that India is approaching the question differently. In an attempt to strike a balance between the cascading benefits deriving from technological innovation and silently sanctioning the monopoly of giants like Facebook and Google, the Government has enforced a particular breed of antitrust legislation.
By putting quota caps on market shares – initially on financial technology, i.e. payment transactions – the National Payments Corporation of India (NPCI) is convinced it will prevent dominant service providers from suffocating the market. The rules are relatively simple – no single operator can process more than 30% of the total payment transactions; and they have to pass through the Unified Payments Interface (developed specifically by and for the Indian direct payments market), imposing absolutely no fees on end users.
This unique approach inevitably limits fintech competitors from the start, yet it ensures fair treatment of customers, allowing still a healthy margin of competition and innovation. A prime example of an industry which enjoys a large amount of direct online payments is internet gaming. Most gambling guides available online speak highly of this decision – exploiting the efficiency of market leaders such as 10Cric Casino, Google Pay and PhonePe, yet leaving a level playing field for Amazon, Paytm, WhatsApp and even smaller incoming competitors.
“The regulations set in place by the Indian government can quite possibly become the benchmark for the rest of the world. By combatting monopoly among digital payment providers the Indian government pushes innovation and takes a stand for consumer rights without infringing too much on companies business opportunities.” – words of Christopher Baude, an Online Casino Expert at the leading desi review site Guide2Gambling..
Financial Technology Paving the Way
India’s regulators approved the market regulation structure in November, just in time for incoming WhatsApp Pay to launch with initial 20 million users. While Facebook’s subsidiary messenger service may boast over 400 million users across India, it will have to gradually increase its coverage, without exceeding those 30% valid for the rest of the fintech competition.
Over in China, Ant Group (Alibaba) and Tencent Holdings have held for a long time the leadership in online payment services, allowing them to branch into other financial fields such as lending and wealth management, investing heavily in promising innovative startups.
India’s UPI is expected to keep growing in volume as convenient peer-to-peer direct payments continue defining the payments sector. The world’s second largest internet base – with half a billion users – has become a captivating playground for digital heavyweights and newcomers alike. With the coronavirus accelerating the inevitable online transformation, we are bound to see both collaborations and rivalries take up.
Facebook has already invested almost USD 6 billion in Jio Platforms, the digital services provider subsidiary of Reliance Industries (owned and run by Mukesh Ambani, India’s richest mogul). Resulting joint e-commerce services are reportedly aimed at providing more opportunities to smaller online merchants and individual consumers alike.
Notably, WhatsApp Pay marks a new level of integration between personal messaging and direct payments. Inevitably it will push other apps and service providers to expand their functionalities and replicate successful practices.