How far is India's mobile payments from China's? : UPI Wake Up India

The rapid growth of e-commerce in India has been particularly notable in recent years, especially in the wake of the COVID-19 outbreak, which has made online shopping a new trend in the digital lifestyle of Indians.

During Diwali this year, the number of online shopping users in India surged by 87% to 87 million from 47 million last year.

Mobile payments have also become a new area of competition for major business organisations, evolving in tandem with the growth of e-commerce and the changing habits of Indians.

Unlike the Chinese mobile payments market, which is dominated by WeChat Pay and Alipay, India's mobile payments market is diverse and competitive. companies such as GooglePay, Paytm, Amazon Pay and PhonePe are the dominant players, with PhonePe being the most commonly used mobile payments app in India, consistently sitting at the top of the app download charts. Recently, Samir Nigam, founder and CEO of PhonePe, predicted that the mobile payment method will be rapidly adopted by Indians and penetrate rural areas in the next two years.PhonePe plans to have more than 500 million users by 2022 and complete an initial public offering by 2023. PhonePe reportedly processed 925 million transactions in October alone, accounting for 40% of India's market share.

The Indian government continues to strengthen legislation and regulation of mobile payments in the country, with regulators having previously been cautious. All mobile payments in India need to be done through the national harmonised payment interface. This means that companies offering mobile payment services must work with the National Payments Corporation of India (NPCI) to use the national harmonised payment interface and work with local Indian banks, such as Jio Payments, to process payment transactions. Meanwhile, the Indian government is wary of mobile payment service providers. For example, WhatsApp, a subsidiary of Facebook, was only granted a mobile payment business licence in November this year after more than two years of application procedures and rigorous scrutiny. In addition, the Indian government has limited WhatsApp's initial number of mobile payment users to 20 million. Recently, Reserve Bank of India (RBI) Governor Shaktikanta Das said that in order to improve the security and convenience of digital payment channels, the RBI will introduce norms for security controls for digital payments and will soon release a draft for public feedback.

The Indian government has been conservative about mobile payments offered by foreign companies. In addition to WhatsApp's difficult application process mentioned above, Paytm, one of India's largest mobile payment platforms, was recently reported to be facing a possible share sale due to the Indian government's unfriendly attitude towards foreign investment. A report by Reuters, cited by the Financial Express website, suggests that Ant Group, one of Paytm's major shareholders, may sell 30% shares worth around $4.8bn. Paytm is currently valued at a total of $16 billion. The Indian government has revised its foreign direct investment (FDI) policy by announcing that investments from countries bordering India must be pre-approved by the Indian government. This policy has severely affected the confidence of neighbouring countries to invest in the Indian market.

According to the Worldline India Digital Payments Report, the total number of digital payment transactions grew by 82% year-on-year in the second quarter of FY 2020-2021, with the value of the transactions growing by 99%. 1.8 billion transactions were completed in September 2020 on the National Unified Payments Interface (NUPI). During Diwali, 57% of mobile payment users were from Tier II cities and beyond in India. This suggests that despite the huge growth potential of the Indian mobile payments market, government regulation and internal market competition have created more uncertainty about the popularity and growth prospects of mobile payments in India.