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Tata’s- Retail payment network

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In India, digital payment market is expected to grow 3X to Rs 7,092 trillion by 2025

  • 2019-2020- India’s digital payment market was Rs 2,162 trillion. Current 160 million unique mobile payments users will be 5X by 2025 to reach 800 million.
  • Mobile payments which currently drive 1% of total digital payment is expected to drive 3.5% of Rs 7,092 trillion by 2025

According to RedSeer Consulting, the share of the digital payments of grocery stores increased to 75 percent due to COVID-19 as people preferred paying through mobile phones due to safety concerns.

UPI, which was developed by NCPI and controlled by RBI and IBA had 21 banks on board in Aug 2016 which grew to 61 banks after demonetization and up to 155 banks as of Aug 2020.

  • UPI grew from $928 million in FY17 to $117 billion in FY19 in transaction value, also expected to further grow to $117 billion by FY23.  In terms of volume, is it likely to grow at 287% CAGR from 5.35 billion transactions in FY19 to 59.77 billion in FY23. BBPS (Bharat bill payment system) transactions are expected to grow at a CAGR of 436% from $146 million in FY18 to $12.6 billion in FY23.

Rupay Card transactions is also expected to grow at 68% from $15.7 billion in FY19 to $25.5 billion in FY23

Looking at the opportunity in India’s digital payment network, Tata’s have planned to set up pan-India retail payments network under the Central banks New Umbrella Entity (NUE)

  • Amongst the Tata group, Tata’s financial arm (Tata Capital) and its most valuable company (TCS) are expected to take the lead in the proposed venture

Reliance Jio and SBI are also in the race to build a new mass market payments entity that would give a tough competition to NPCI

With the growing dominance of Reliance and Amazon in online retail market, Tata’s plans to launch a ‘Super App’ which could be benefited with the move to set up pan-India retail payment.

  • Tata which already operates Tata CLiQ, an eCommerce platform, online grocery store StarQuik and online electronics platform Croma through its digital subsidiary Tata digital. All these multiple consumer offerings could be integrated with its ‘Super App’ onto a single digital platform

NPCI currently holds 60% of retail payments volume in India through UPI, NFS, Aadhar-enabled payment system and IMPS.

NUE will help central bank to achieve its stated objective of “derisking” India’s increasing retail payments ecosystem. NPCI being a not for-profit entity, NUE can be for-profit entity with diversified shareholding and no single promoter is allowed to hold more than 40% investment at the time of the application, with stipulation to reduce it to 25% within five years of operations.

Expecting FDI, RBI has allowed foreign ownership in the entity with the deadline set by Central bank as Feb 2021 for the interested entitiesCentral bank is expected to issue not more than two licenses. With the interest of Tata’s, Ambani’s and SBI in the retail payment network, would foreign investors look for the ownership in this entity?

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