Everyone wants in — from Mukesh Ambani’s Reliance Industries Ltd. to Jeff Bezos’ Amazon.com Inc.; from card companies to banks. The fear of missing out on the surge in retail digital transactions in India has prompted a motley crew of organisations to come together and apply for ‘New Umbrella Entity’ licences, the deadline for which ends on March 31, 2021.
The NUE—seen as a competitor to the National Payment Corporation of India — will be allowed to run for-profit retail payment infrastructure in India provided its systems are interoperable with those that currently exist. The rules to set up NUEs were laid down by the Reserve Bank of India in August 2020 and the regulator is likely to hand out licences only selectively.
Still, the who’s who of the financial sector and beyond are applying for an NUE licence, according to people familiar with the matter.
- Tata Group, HDFC Bank Ltd, Kotak Mahindra Bank Ltd, PayU and Mastercard Inc. have applied through their NUE entity Ferbine Pvt.
- Paytm, IndusInd Bank Ltd, Ola Financial, Centrum Financial Services, Electronic Payment and Services or EPS, ZetaPay, PolicyBazaar, Suryoday Small Finance Bank Ltd, and Think360.ai through their NUE entity Foster Payment Networks Pvt.
- Amazon, ICICI Bank Ltd, Axis Bank Ltd, Visa Inc., Pine Labs and Billdesk have applied through their NUE entity Mopay Services.
- Reliance Industries, Facebook, Google, Infibeam Avenues and So Hum Bharat Digital Payments have also applied through a yet unnamed entity.
According to a Bloomberg report, two other consortia of government owned banks have applied. Financial Software and Systems is applying with Indian Bank, Central Bank of India, National Bank for Agriculture and Rural Development and India Post Payments Bank Ltd. U.S.-based payments firm FIS joined with Union Bank of India and Punjab National Bank to apply as well.
E-mail queries sent on Saturday to the companies listed above did not elicit responses.
“The rush is all about creating entities similar to NPCI that are also allowed to make a profit, as nobody wants to miss out on the opportunity. But it is hard to tell how effective these replicas would be until we see the extra value they would bring to the table,” said Vivek Ramji Iyer, partner and leader – financial services risk at Grant Thornton Bharat LLP.
One of the key reasons behind setting up of the NUE is to create alternatives to NPCI to prevent a monopoly and concentration risk. While NUEs would have similar functions to NPCI and will also be interoperable, the key differences would lie in what additional services they offer and who owns them, said Iyer.
NPCI, which functions as a ‘not-for-profit’ entity, operates at least 12 payment platforms. These include the unified payments interface and immediate payment service for digital real-time payments, Aadhaar-enabled payment system for micro-transactions, national financial switch that facilitates interoperable cash transactions through a network of shared ATMs, cheque truncation system for bank cheque clearance, Bharat Bill Payment System for recurring bill payments, FASTag for electronic toll collection, and homegrown card network RuPay, among others.