Over the last 18 months, India has moved full-speed ahead from a nearly entirely cash-based society to one with ambitions of being totally cashless. The most public — and most famous — step in that direction is demonetization in India, when last November the central government suddenly and rapidly banned 500- and 1,000-rupee Indian notes. Thus, in one fell-swoop, 86 percent of the nation’s physical currency was taken out of circulation.
The suddenness of the move, combined with the fact that it was largely unexpected, led to some rather notable early bumps in the road. Before the switch, 95 percent of all transactions in India were conducted in cash, and 90 percent of merchants didn’t have the means to accept anything other than cash. On top of this, 85 percent of workers were paid exclusively in cash, and as much as two-third of the population was entirely unbanked, or nearly so. Lines at ATMs stretched endlessly, commerce ground to a halt in some regions and workers went more than one pay cycle without being paid for their work.
But, where there are pain points — even rapid onset ones brought on by demonetization — there is also innovation. About six months before demonetization went into effect, the Reserve Bank of India (RBI) announced the launch of a new mobile-powered system called “Unified Payment Interface” (UPI), which was designed to facilitate money transfer through email and text messages.
UPI is built off the country’s biometric-powered national ID system called “Aadhaar” — a 12-digit unique identification number that encompasses biometric information of registrants, including fingerprints and iris scans. While the majority of the Indian population remains unbanked, the government has succeeded at registering over 80 percent of the population to Aadhaar.
“We are taking a bet on payments banks. We want to see where they push the system,” noted RBI Governor Raghuram Rajan when UPI was first announced.
And, a little over a year later, with a now demonetized India in play and millions of users rushing in droves to mobile payments schemes such as Paytm, PayU and other local mPay purveyors like Airtel or MobiKwik, it seems some new — and very large and international — entrants are looking to “push the system.” Big players such as Google, WhatsApp, Uber and Facebook, according to recent reports, who are looking to gain entry with the UPI as their chosen door.
Google’s Early Moves
Google managed to snag headlines this week with the announcement from RBI that the tech firm had sought the central bank’s approval to integrate the government-promoted Unified Payments Interface (UPI) with its Android Pay application.
“Google’s testing is almost complete, and the NPCI is waiting for RBI approval,” said A.P. Hota, managing director of the National Payments Corporation of India (NPCI). “Let me not give any timeline, because the RBI would like to take their own time for things like this.”
Hota also indicated that Google is developing a separate India-focused app, which it will name differently, that will be part of an integration with a bank.
That UPI-enabled app is likely to launch within the next two to three months, according to Hota, after the RBI has approved various security.
When asked about its recent mobile payments push into India, a Google spokesperson told inc42: “We are always looking for ways to make it easy for people to pay with their mobile devices, such as Android Pay in some countries, and looking to expand those capabilities to the next billion users.”
And, of course, India is some very fertile ground for Google to be staking out those next billion users, since it is far and away the dominant mobile platform in the nation. By some estimates, nine out of every 10 smartphones in India run on the Android platform.
But India does not just look like fertile ground to Google — and it is not the only big-name player making major mobile moves.
Also Coming to the Party…
Notable in Hota’s remarks — other than the reveal that Google may be the first big U.S. tech player to be offering a full UPI solution in the Indian market — is just how many other players are also looking for their own “next billion users.”
“Google is testing UPI-enabled payments. The Reserve Bank of India has to look into it. Facebook and WhatsApp are in preliminary talks as well. Google and apps such as WhatsApp and Facebook will have a pervasive presence in India,” Hota noted. “Such an integration is technologically possible, but we are waiting for the Reserve Bank of India’s approval. Such a move can make a difference, as these companies can bring in volumes.”
Hota failed to mention Amazon and Uber — who are also in the mix, albeit in different capacities. Uber is expected to launch a UPI payment solution in a few weeks, where it will allow riders to connect their Uber accounts to a UPI payment account (they intended to launch a UPI compliant mobile wallet of their own next year, as their main in-nation competition Ola already has).
“We are currently evaluating the possibilities around a comprehensive UPI integration and continuing to engage with the relevant stakeholders. As a first step, we will look at offering our riders the option to use their existing UPI IDs to pay for their Uber rides. As a technology-driven company, we applaud the potential and impact that FinTech innovations like UPI can make. It is the future of Indian payments, and we are proud to be a partner in this monumental mission of the government to facilitate [a] digital payments-led society,” noted an Uber spokesperson.
Amazon, for its part, will not be developing its own app but will use a pay button for UPI on its eCommerce portal, according to reports. There have also been reports that Amazon is looking to expand its Amazon Pay mobile wallet in India via strategic partnerships with entities including electricity and insurance companies.
So what’s next for digital payments on the sub-continent that it seems everyone wants a piece of payments-wise these days?
According to Hota, the RBI is looking to contribute 11 billion digital transactions to the Indian landscape in 2017 — up from 3.5 billion last year. It’s a lofty goal, but with the size and scope of the players it is looking to sign out — perhaps not an unreasonable one.