Facebook and Google chase a new trillion-dollar payments market in India

India saw a brief spurt in digital payments two years ago when Prime Minister Narendra Modi's government banned most of the nation's existing bank notes.

Surendrasingh Sucharia always has a few thousand rupees in his pocket, but can’t recall the last time he used cash. The 29-year-old product manager in Bangalore uses a string of smartphone apps including ones from Google and India’s Paytm to pay for everything from $40 bags of groceries to street food that costs pennies.

A bewildering array of digital payment businesses from global names like Facebook Inc.’s WhatsApp to Google are in a slugfest to win Indian users. Warren Buffett’s Berkshire Hathaway Inc. is acquiring a stake in the company behind payments leader Paytm.

Meanwhile, a string of other big-name players are also expanding in the country’s digital payments market including its banks, its postal service, and its richest man, Mukesh Ambani.

India saw a brief spurt in digital payments two years ago when Prime Minister Narendra Modi’s government banned most of the nation’s existing bank notes, although the spike petered out as new bills were printed. But over the past year, a string of new apps have made payments increasingly easy, and the discounts and cash bonuses they offer are proving irresistible to young, urban users like Sucharia.

Credit Suisse Group AG now estimates that the Indian digital payments market will touch $1 trillion by 2023 from about $200 billion currently. Cash still accounts for 70 per cent of all Indian transactions by value, according to Credit Suisse, and neighboring China is far more advanced with a mobile payments market worth more than $5 trillion.

But local players have a stranglehold on China’s digital payments space. Modi’s administration, meanwhile, has welcomed foreign firms in order to expand financial services across India.

“This kind of a promising market exists nowhere else,” said Vivek Belgavi, a Mumbai-based partner at consultancy PwC India with an expertise in financial technology.'

Still, the Indian payments market remains a chaotic field where the rules are hazy on what players can offer. And users often switch between apps. Rahul Matthan, a Bangalore-based lawyer, says he’s used every one of the leading payment apps, although he now confines most of his transactions to BHIM, Paytm and WhatsApp payments.

Experts like Vinayak HV, Singapore-based senior partner at McKinsey & Co., say profitability isn’t close on the horizon for the industry. While it’s too early to call the game, here are a few players with a shot at winning:...Read More

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WhatsApp to hasten payments services to 200 million Indians

The messaging app will partner HDFC Bank, ICICI Bank and Axis Bank to process the transfers, and State Bank of India will join once it has the necessary systems in place.

Facebook is set to offer its  WhatsApp payment  services to the whole of India as early as next week in an attempt to win market share, even though its partners aren’t all ready, said people familiar with the matter.



The messaging app will partner HDFC Bank, ICICI Bank and Axis Bank to process the transfers, and State Bank of India will join once it has the necessary systems in place, the people said.



Facebook  was aiming for a full rollout with four partners but decided to go ahead with just three as its rivals were racing ahead, the people said, asking not to be named as the information isn’t public.



The entry of Whatsapp into India’s payments space has been likened to WeChat, which reshaped payments in China when it expanded beyond messaging.



The pilot version of WhatsApp Pay — started with 1 million users in February — received rave reviews, threatening the market share of incumbents Google Tez and Alibaba-backed Paytm, which lack the benefits of a social network.



“WhatsApp has a great starting point: a monopoly in chat,” said Vivek Belgavi, leader for financial technology at PwC India. “High engagement makes it a credible competition.”



More than 200 million Indians already use WhatsApp messaging, equivalent to 60 percent of the US population and a daily active usage that Forrester estimates to be about 20 times higher than Paytm’s.




Emails to representatives of WhatsApp, State Bank of India, HDFC Bank, ICICI Bank and Axis Bank weren’t immediately answered.