Consumer tech firms lap up e-payment cos in data quest

The key prompter is a potential goldmine into users' financial preferences and behaviour that these e-payment platforms have on offer, alongside the acquirer getting to leverage a fully-functional payments platform.

Written by Pranav Mukul | New Delhi | Updated: June 18, 2018 12:12:35 am
Consumer tech firms lap up e-payment cos in data quest Securing users’ financial preferences, behaviour seems to be the key incentive.

When digital payments platform Chillr was acquired by Swedish communications company Truecaller earlier this week, it marked the latest among a series of deals involving digital payment platforms being lapped up by consumer tech companies over the last three years. The key prompter is a potential goldmine into users’ financial preferences and behaviour that these e-payment platforms have on offer, alongside the acquirer getting to leverage a fully-functional payments platform.

Earlier, in April 2015, e-retailer Snapdeal acquired digital wallet Freecharge and sold it to Axis Bank in July 2017. In April 2016, Flipkart acquired UPI-based payments startup PhonePe. Taxi-hailing company Ola, along with its founders, over the last three years has picked up 100 per cent stake in wallet firm ZipCash. In July 2017, e-commerce company Infibeam announced the acquisition and merger of payment gateway firm CCAvenue. The global list of e-commerce companies getting into payments includes eBay acquiring PayPal back in 2002 and Chinese giant Alibaba and its founder Jack Ma launching Alipay in 2004. Seattle-based Amazon, too, went the Alibaba way and launched its own payments arm Amazon Pay in 2005.

The trend in India of commerce platforms picking up digital payment firms follows the global path, where major online retailers have entered payments to complement their commerce business. Notably, most of the major acquisitions of digital payment platforms in India were by companies that have integrated these platforms to complement their own products. “Digital commerce companies are data enabled and data driven. Payments is one particular area where the amount of data they can get and the kind of insights they can get about preferences of customers, frequency of buying, preferences related to different types of payment modes, how they react to loyalty programmes, etc. This is primarily why anyone in the digital commerce space would like to have their own payments arm,” Arnav Gupta, researcher at Forrester Research told The Indian Express.

Experts have also pointed out that it is difficult for standalone wallet companies to survive the competitive market where online financial services platforms are constantly innovating to offer services other than peer-to-peer or peer-to-merchant payments. Paytm, which is one of the largest digital payments platforms in the country, in 2017, launched its own e-commerce arm Paytm Mall.

In an interview with The Indian Express last week, Rahul Chari, co-founder and CTO of Flipkart-owned PhonePe said: “The reason you’re seeing acquisitions of fintech companies by e-commerce companies is because it has been generally proven that it is good to have a commerce platform, which has a strong adjacency to payments because it helps both the commerce play and the payments play grow faster.”

The digital payments sector in India, is still deemed to be in a nascent stage. “Cash share in India is still estimated at 70 per cent in value terms (90 per cent in volume) and digital currently only aggregates $200 billion. China is a recent example of an economy transitioning to digital on the back of rising mobile and data penetration. Mobile payments now exceed $5 trillion,” Credit Suisse noted in a report dated February 5, 2018. “Payment integration into popular apps in India will drive the digital payment market in India to $1 trillion over the next five years,” the report added.

The growth potential of digital payments in India, clubbed with availability of an open-source state-backed payments mechanism in form of UPI, has also prompted global technology majors to enter the country’s online payments space. Google’s Tez and WhatsApp’s UPI-based payments service have rattled the domestic firms. “Nothing stops them from competing with a Google or a WhatsApp, but these are cash-rich companies and they are not worried about making money from payments at all. Their entire strategy is around data and they want people on-board their platform and transact using their platform so that they can get some meaningful insights into a customer’s behaviour,” Gupta said.

The entry of such global cash-rich tech majors in the payments segment could also further spur consolidation especially for smaller players. “We expect consolidations to be the force in the next few years, with the bigger players focusing on opportunities to expand their footprint in India and other markets,” said Prarthna Tiga, senior technology analyst at research firm GlobalData, adding that smaller players in the meantime, are tapping into unidentified opportunities to stay relevant in the market. “Therefore, creating a compelling case for people to use digital money is becoming absolutely necessary for smaller players, while bigger players are taking advantage of their wide user base,” she pointed out.

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