1、 Executive summary Indias push toward cashless payments accelerated in 2019. Mobile payments that bypass card rails rose 163% to $286 billion in 2019. Point-of-sale transactions completed using debit and credit cards, including online and in-app transactions, grew 24% to $204 billion. S The National

2、 Statistical Office; National Payments Corp. of India 2020. S National Payments Corp. of India 2020. S Reserve Bank of India 2020. S Reserve Bank of India; National Payments Corp. of India 2020. S central banks; real-time payment system operators; proprietary estimates 2020. S National Payments Corp

3、. of India; proprietary estimates. 2020. S The Economic Times; Business Standard 2020. S order food; and book hotel rooms and bus and airline tickets. Customers can access instant credit, buy insurance policies and invest in gold and mutual funds through the apps. Paytm, PhonePe and Amazon Pay offer

4、 a variety of payment methods, including cards and stored-value wallets. Google Pay plans to introduce a tokenized cards feature to support debit and credit card payments in India. 10 2020 India Mobile Payments Market Report Paytm differs from the rest in how it delivers financial services. It has t

5、aken a more hands-on approach by pursuing regulatory licenses available for a nonbank, whereas others have courted partnerships with financial institutions. Although it is conceding the lead in payments, Paytm is steadily building a bank-like platform. Thanks to its limited- purpose banking license,

6、 the company has a direct connection to the UPI rails, accepts deposits from the public and issues debit cards. It has brokerage licenses to distribute mutual funds and insurance policies. While the company plans to turn into a small finance bank to make lending, according to The Times of India, it

7、currently leverages partnerships with nonbanking lender Clix Capital and Citibank to offer microloans and a co-branded credit card. Clever collaboration with banks and nonbanks may help Google and PhonePe steer clear of regulation, but such an approach also involves some limitations and risks. The u

8、nit economics of each transaction could be less favorable for companies that need a sponsor bank integration to facilitate UPI transactions as they might share fees earned on transactions with UPI partner banks depending on their commercial agreements. PhonePes dependence on Yes Bank to access UPI r

9、ails rendered the app largely inoperative for a couple of days in March when RBI imposed a moratorium on deposit withdrawals at the struggling bank. Paytm, through its distribution licenses, is able to offer a wide range of mutual funds and insurance, while mutual fund and insurance policy options o

10、n the PhonePe platform are limited. Googles plans to offer preapproved loans in partnership with four banks have yet to materialize. Amazon appears to hold a middle view. While it has been active in cultivating partnerships with financial institutions and fintechs, it has also secured regulatory lic

11、enses to offer a stored-value wallet and to distribute insurance policies. Amazon made greater strides in facilitating unsecured credit to consumers as larger purchases on its e-commerce platform provide lending opportunities. Its partnerships with banks and nonbanks for co-branded cards and point-o

12、f-sale credit to consumers could help it improve payments processing costs and earn a share in interchange revenue. Leading mobile payment companies are also ramping up their investments in Indias millions of small merchant establishments. Their efforts include digitizing ledger books of small store

13、s, creating digital fronts for customers to discover them online, using small shops as ATMs to facilitate cash withdrawals for customers and developing visual codes for restaurants that allow customers to scan and browse the menu and pay for their orders. Building networks of neighborhood stores cou

14、ld allow payment fintechs to explore options of providing working capital loans. Mounting customer acquisition costs, modest revenues Persuading millions of consumers, neighborhood grocery stores and small merchants to adopt digital payments has so far proved to be costly for Indian payment companie

15、s that have actively promoted the adoption of their apps through lucrative cashback perks and discounts. Interoperability and standardized payment features make it easy for UPI users to shift allegiance swiftly. As the industry remains in the customer acquisition phase, user loyalty does not rest on

16、ly on superior payment experience, and payment fintechs continue to offer rewards and engage in advertising expenditure to acquire new users and keep existing ones from abandoning their apps. Promotional costs rising at leading payment companies in India Periods represent financial years 0 5 10 15 2

17、0 25 30 35 40 PaytmPhonePeAmazon PayGoogle India Digital Services Billions of rupees 20182019 Data compiled March 17, 2020. Figures for Paytm represent One 97 Communications Ltd., which holds a 49% stake in Paytm Payments Bank Ltd. Vijay Shekhar Sharma, the founder of One 97, holds the remaining 51%

18、 in Paytm Payments Bank, which houses the wallet and payments bank business. The wallet business was hived off as a separate company in 2016 after Paytm secured a limited-purpose banking license. Figures for PhonePe, Amazon Pay and Google India Digital Services are on a stand-alone basis and do not

19、reflect the results of their affiliates or subsidiaries. Advertising promotional expenses for Google India Digital Services, which houses Googles UPI payments business, have been adjusted to include the impact of cash rewards reimbursed by its parent. Sources: S Ministry of Corporate Affairs 2020. S

20、 Ministry of Corporate Affairs 2020. S Ministry of Corporate Affairs; proprietary estimates 2020. S National Payments Corp. of India; The Wall Street Journal; Indias Business Today 2020. S CNBC; the Financial Times 2020. S The Economic Times 2020. S Reserve Bank of India; National Payments Corp. of

21、India 2020. S&P Global Market Intelligence. All rights reserved. Although the four banks lag Yes Bank as a settlement partner processing interbank transfers, they are poised to eat into the smaller banks share. Yes Bank processed 37% of UPI transactions in the fourth quarter of 2019, driven by its e

22、xclusive partnership with PhonePe. That lead is now under threat with PhonePe shifting to ICICI Bank after Yes Banks servers and services went down for a couple of days in March. The central banks moratorium on withdrawals from ATMs and internet banking through Yes Bank disrupted services of several

23、 fintechs that work with the institution. PhonePe is now expected to work with multiple bank partners, including Yes Bank and ICICI Bank. Although big banks continue to hold the keys to the mobile payment infrastructure, nonbanks are the primary payment interface providers that handle consumer and m

24、erchant services. The biggest threat banks and card networks may face from surging payments via nonbanking apps is the prospect of a China-like situation where millions of people jump to mobile from cash, leapfrogging the use of cards. Ant Financial and Tencent have cornered 18 2020 India Mobile Pay

25、ments Market Report the mobile payments market due to the popularity of their apps, and banks have been cut out as intermediaries in China. While banks in India are not in danger of losing access to low-cost retail deposits, disintermediation risk exists in the form of losing direct payment relation

26、ships with consumers. Continued payments relationships with customers remain critical to big banks retail businesses as they leverage payment data to convert the depository relationships into assets by selling financial products. For example, ICICI Bank and Axis Bank offer up to 70% and 87% of perso

27、nal loans to existing customers, respectively. With nonbanks right in front of the customer, banks could lose out on opportunities to deepen customer engagement. UPI to propel data-driven banking In the wake of the COVID-19 crisis, banks are scaling down their exposure to unsecured lending, includin

28、g credit cards and personal loans. As traditional financial institutions have become risk-averse, popular payment apps will have an opportunity to play a mainstream role in providing loans and insurance. Payment fintechs are already tailoring their offerings by anticipating consumer needs. PhonePe a

29、nd Paytm are providing in-app COVID-19-related insurance policies that cover hospitalization and other expenses, and promoting gold and mutual fund investments. Amazon Pay has widened the use cases for its deferred payment option to allow customers to buy essentials and make bill payments. Payment f

30、intechs ability to make greater inroads into lending could be limited in the near term as lenders might be reluctant to underwrite loans. However, when risk-taking comes back into the system, payment fintechs will become the natural partners to disburse loans digitally as UPI apps remain the largest

31、 financial distribution platforms to acquire customers with little or no credit history. Millions of transactions occurring through UPI apps generate troves of data about users spending behavior and patterns to build profiles of customers and their lending needs. Information about users utility bill

32、 payments and digital shopping could augment lenders underwriting models to assess the creditworthiness of potential customers. UPI apps could also facilitate new use cases supported by the account aggregator framework that allows licensed nonbanks to enable consent-based sharing of personal financi

33、al data. Authorized nonbanks acting as account aggregators can serve individuals and small businesses by bringing together and providing a consolidated view of financial data from various sources such as loan accounts, deposits, credit cards and investment accounts. Customers seeking better financia

34、l products can also use account aggregators to pass on their financial information to banks, insurers and fintechs. Instead of spending top dollar on customer acquisition, account aggregators might partner with payment fintechs to tap into their customer base and share data through UPI apps. Popular

35、 payment fintechs themselves could acquire account aggregator licenses to build new use cases and support their own financial services bets. S&P Global Market Intelligence previously published a portion of this report on March 12, 2020, as “US big techs super app bets riding on real-time payment rai

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