Amazon took some time to expand into India. E-commerce seems to have been a hit. … [+]
India’s $357.5 billion payments sector has proven challenging for US tech giants. Google only
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Despite praising its strengths in social media, messaging, and e-commerce, it has been unable to substantially increase its market share.
Therefore, it will be very interesting to observe new efforts by Amazon to tap the Indian payments market. The company has applied for and obtained the necessary licenses in stages, as well as seeking partnerships with major local companies. Over time, this strategy could allow Amazon to build a full-fledged payments ecosystem in India.
Seller Payment Pivot
Despite an aggressive campaign to build market share in India’s retail payments sector, Amazon Pay still remains far behind Google Pay, PhonePe and Paytm, which control around 90% of the market. Even just reaching the 10% threshold for Amazon Pay would be a huge accomplishment. Simply put, for most retail users of the previous three e-wallets, there is no compelling reason to switch to Amazon Pay.
That said, Amazon’s strength in e-commerce means there are significant synergies for the company in India’s merchant payments sector. To achieve this objective, Amazon Pay received a payment aggregator license from the Reserve Bank of India (RBI) in February. All payment gateway operators in the subcontinent are required to obtain this license to acquire merchants and deploy digital payment solutions. This license allows the “Aggregator” to act as an intermediary between merchants and payment processors or banks, accepting payments on behalf of multiple merchants, consolidating them, and distributing funds to each merchant. I can.
We believe that payment aggregator licenses can help Amazon in many ways. This will allow the company to process e-commerce payments for merchants on its app, as well as serve direct-to-consumer sellers who want to sell their products online. Considering that Amazon has around 26% share in India’s $113 billion e-commerce market and has a large network covering 8.5 million brick-and-mortar sellers and 10,000 online sellers. , there is a huge market opportunity to be exploited.
Credit card cooperation
Amazon has been a laggard in India’s retail payments sector, but its efforts so far have focused on standard e-wallet functionality and buy now, pay later (BNPL). But Amazon appears to be interested in the credit card space, which is currently in its infancy. The company recently launched a co-branded credit card with Amazon Pay ICICI Bank and is considering a credit card tie-up with National Payments Corporation of India (NPCI).
Credit card penetration in India was previously estimated at 5.5% of the population of 1.4 billion. The RBI said in January that there were 100 million credit cards in the country, but did not say how many credit card users there were. In any case, the number of cards in circulation has increased by 77% since December 2019. Although the penetration rate is low, it already has a market larger than the entire population of Malaysia and Thailand. As India becomes more affluent, the credit card market should grow steadily.
Crucial to the future of credit cards in India is the extent to which they are integrated with NPCI’s all-important United Payments Interface payment rail. Since UPI has an overwhelming advantage in the Indian payments landscape, once the card gains a strong foothold, it is very likely to penetrate deeper into the Indian market.
Fintech In-Solutions Global Ltd estimates that credit card and UPI integration will increase credit card acceptance in India by 30 times. This calculation is based on a projection that UPI will open up 21 million UPI QR payment terminals to credit cards in addition to its existing 70,000 POS terminals that already accept credit cards.
play the long game
Given the intense competition in India’s payments market, Amazon’s new efforts will likely take time to bear fruit. The company’s credit cards will almost certainly need subsidies to gain much traction. Subsidies will be less important on the merchant side, and Amazon could use Paytm’s loss of a payments bank to attract more merchants to its network.
We are less optimistic about UPI retail payments, but as Google Pay and PhonePe continue to dominate the market, they may become a target for regulators. But the measures to reduce the UPI market share of these two tech giants will do more than help other tech giants like Amazon (or WhatsApp Pay) increase their presence in the subcontinent’s most important markets. , will be aimed at boosting the prospects of Indian fintech startups. payment rail.
