Thinkpad: Battle Royale
Thinkpad: How will the multi-player PUBG-like game in the Indian payments sector end?
Happy Sunday.
It’s been a week of battles.
I’m sure the U.S. presidential election is the first that comes to mind. But most of you have already spent the week gorging on that news—from tracking voting data across American states few of us will ever visit, to rolling your eyes at Donald Trump’s tweets, and (admit it) experiencing some schadenfreude at the chaos that prevailed in the world’s most-advanced economy. Eventually, on Saturday night, Joe Biden was projected to win the presidency.
We’ll spare you a full recap.
The battle we’re talking about is the one playing out across India’s payments market. Think of it as a multi-player PUBG game, with each player having a secret weapon that no one else does. And a moderator of sorts who is trying to impose some rules in an otherwise free-for-all fight.
This week, the NPCI permitted WhatsApp to roll out payment services to 20 million Indians. This is the first phase of the rollout after a two-year delay.
There is a palpable sense of fear (or anticipation) around the entry of WhatsApp Pay. The messaging service has 400 million users in India. From the inspirational good morning messages to jokes and GIFs and raucous family groups, WhatsApp is ubiquitous. Throw in an easy-to-use payment service built on the inter-operable UPI and you could easily see WhatsApp Pay expand rapidly to take a large share of the market in a short period of time.
So what? Well, there are two concerns here. While WhatsApp Pay will have the same security features as any other third party app, there are fears that its wide user base could open up the payment platform to social engineering attacks in a market still thin on financial literacy and awareness. At the systemic level, the question is—can you allow one player to take an inordinately large share of a payment segment recording two billion transactions a month?
On the latter, it must be said WhatsApp Pay isn’t exactly up against novices. So perhaps competition will take care of the problem?
GooglePay and Walmart owned-PhonePe currently have about 40% each of the UPI market. Each comes with moneybags and their own strengths. So should we just let the three (and possibly a fourth in the form of Amazon Pay) slug it out? Maybe. It is a battle of near-equals.
But NPCI doesn’t see it that way and has decided to impose a 30% market share cap on the volume of transactions starting January 2021. Existing payment apps have three years to comply so, frankly, this is essentially intended to cap WhatsApp Pay’s expansion.
Needless bureaucracy? At first glance, yes. But as one senior financial sector official bluntly said: ‘Do you have a better idea? To ensure the system is not disrupted by unhealthy competition? Or to ensure that one large payment app doesn’t corner the UPI payments market? We’re willing to listen.’
No, I guess we don’t. But others might and we look forward to the debate. For a start, this twitter thread by veteran investor Haresh Chawla will give you much to think about.
From a multiplayer battle to one that proved to be remarkably one-sided.
There was one more battle (if you can even call it that)—between Ant Financial and the Chinese government. An IPO the size of $35 billion. An IPO with $3 trillion in subscriptions. An IPO shut down at the last minute.
Why? From all accounts, because Jack Ma spoke out of turn. But there may be a broader theme here. As this Bloomberg News editorial said, the Ant IPO fiasco is only “the most dramatic example yet of the financial frictions emerging globally as fintech upstarts invade the territory of central banks and closely-regulated traditional lenders”.
We’ll let you get back to your weekend. Watch those words. Or not. Definitely watch your money and who’s moving it.
Till next week.
