Paypal, the global digital payments leader, today announced the launch of its domestic operations in India. Incidentally, the launch was timed to coincide with the first anniversary of demonetisation, which was done last year to bring down the cash transactions in the country forcibly and hasten the share of digital transactions.
Though there are a host of players already in the market like Paytm and Mobikwik, Paypal thinks that it will be able to offer new features in its payments solution that will push merchants to adopt its solution. Says Rohan Mahadevan, ceo of Paypal (APAC region): “The fact that 60% of the ecommerce deliveries are still on cash-on-delivery basis implies that there is a huge opportunity to bring a more reliable payment mechanism to the country.”
To be sure, Paypal already has an India presence. For nearly a decade, Paypal has been offering cross-border payments in India enabling SMEs and freelancers to leverage the global opportunity. These companies, typically small exporters and individuals, used Paypal to collect payment for services offered. According to Mahadevan, one-third of India’s B2C exports go through Paypal.
According to their estimates, there are nearly 20 million small enterprises or individuals who offer their services abroad, what Mahadevan calls the 9-5 economy, as many of them operate nights for the western markets. PayPal also has its biggest development centre in India and has four offices in the country.
To start with, Mahadevan says that they will differentiate their payment product offering better security, reliability and safety. Last year, shortly after demonetisation, the government had said that digital transactions through banks, payment gateways or credit cards below Rs 2000 don’t need a one-time-password (OTP) to validate the transaction.
Mahadevan feels that no many have offered this facility to customers as they were not sure who will take the risk for such payments. The company hinted it could offer the Indian customer that convenience. Says Anupam Pahuja, managing director for Paypal India: “We take the risk for all our payments”.
The company won’t reveal the investments it is making in country or the number of employees it has currently, saying that they don’t report break up of their global revenues. The company also did not share any plans of how they will compete with the incumbents who have already a large share of the payments market. To start with, the company has inked deals with online show booking firm bookmyshow, travel portal makemytrip and yatra and online shopping firm firstcry.com.
It will be interesting to see how Paypal scales up its business in India given that it will start at a time when the competition in the payments arena is increasing on a daily basis. Paypal transactions costs are usually pegged to the average rates in the markets they operate.
But, in India, with the government getting involved in payment procession through UPI and its app BHIM, transactions costs are being pushed down. Further, companies like Paytm are subsidising payment transactions costs as they can afford to do so with large investors like Softbank willing to bank roll their losses.
Paypal’s Pahuja says they will not resort to subsidising their transaction charges for payments but will offer additional benefits to commercial establishments that will make their proposition lucrative. Sellers who offer Paypal as a payment option will get a free refunded return service, where the good return will be shipped back to them at no extra cost.
Paypal will also allow for a 180-days dispute resolution window right at the launch as it would offer One Touch – which help skip login and enabling a quicker checkout. Paypal will also offer a multi-lingual customer support, something the new digital payments firm have kept away from. Paypal can also be integrated in any website with a simple 10-line software code, enabling merchants to create its payments gateway quickly.
India’s payment market is expected to reach Rs.817.3 crore by 2019. The payment industry is composed of various segments—mobile wallet, mobile banking, mobile point of sale (MPOS), bill payments and online payment gateway—with each segment comprising a number of entities.
Mobile banking customers alone are expected to increase from the current 140 million to 257 millon in 2020, according to a KPMG report. The Digital Payment Systems Market in India market will witness a CAGR of 58.90% during the forecast period FY2017-FY2023.
On Monday evening, Softbank’s founder Masayoshi Son commended Paytm for its phenomenal growth in the Indian market. Son has invested in Paytm from his $100 billion Vision Fund and expects the company to grow in importance like Alipay has grown in China. Thanks to demonetisation, Paytm grew 230 per cent year-on-year in the last twelve months to March 2017 and controls 58 per cent of the digital payments market.
Paytm, which started as a digital wallet, has branched into myriad businesses that require payment services. It’s got its own online retail outfit, where it subsidises products to promote its wallet. It is now offering food wallets to corporate, akin to Sodexho coupons.
Paypal, however, intends to be a plain vanilla payments services company, as it does in 200 countries in the world.
