Bangalore —  Technology giants Facebook, Amazon and Google and credit-card providers Visa and Mastercard are among those vying for unprecedented access to India’s burgeoning digital retail payments market.

The companies are part of four consortia preparing to apply for licences 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 Credit Suisse Group predicting $1-trillion in online payments in India 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 CEO 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 start-ups Pine Labs and BillDesk. Another group is led by billionaire Mukesh Ambani’s Reliance Industries and its partners Facebook and Alphabets Google, which together agreed to invest more than $10bn in Reliance’s digital services unit last year.

Sharma’s PayTM heads a group that includes ride-hailing start-up 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 spokesperson for Tata Group and a spokesperson for Google declined to comment on the potential bidders. Amazon and Facebook did not respond to e-mailed questions.

The contest is fierce as regulator Reserve Bank of India is expected to give just one or two licences, 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 chair of IT services company Infosys.

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% of $781bn 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 CEO of Silicon Valley-based Pegasus Tech Ventures, an investor in Robinhood and other fintech start-ups. “A new generation of entrepreneurs is grabbing the opportunity.”


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