The government of India is launching three tools that will help cashless payments gain adoption but could hurt some of the leading electronic payment providers in the country, including Paytm, MobiKwik, FreeCharge, Citrus, ItzCash and Oxigen, if they don’t step up their game.
According to a report in Reuters, the government is rolling out a United Payments Interface (UPI) app that makes it easier for interbank fund transfers and Aadhaar Pay, which is a payment service that is linked to a bank and requires a national identity card that can be use with a fingerprint. The government is also backing Bharat QR, which is also a bank-linked service that relies on labels that can be read by machines. Bharat is aided by Visa and MasterCard and requires a smartphone. It’s aiming to get 2 million merchants by September. As for the UPI app, Reuters noted it has been downloaded greater than 17 million times during the first two months of its launch, with the value of the transactions increasing 18 times from November through January.
In order to stay ahead of these Indian government–supported payment services, Paytm, which counts Alibaba as an investor, is adding more services, noted Reuters.
“The point is that e-wallets as a standalone business will be massively risky and not viable,” said Vijay Shekhar Sharma, founder and chief executive of Paytm, in the report.
Paytm’s parent company has raised $675 million in funding from Alibaba and other investors and claims to have a valuation of around $5 billion. MobiKwik, which is part owned by American Express and Sequoia Capital, raised around $80 million in venture funding and is aiming to get a $1 billion valuation by raising more funding by investors. Both companies, noted Reuters, are waiving fees so there are free money transfers from wallets to bank accounts in an effort to stand out from the pack.