If you’ve tried to buy music on the newly launched iTunes India store, you’ll notice that because your credit card information is already with Apple (when you log in), the billing process is very smooth. You click ‘buy’, a credit card transaction is processed, and you get your content, whether it is buying music or applications. It’s the same if you buy an application on the Google Play Store, or, as I found out while promoting the #NAMA Conference in October, advertising online on Facebook in India.

For a buyer, this is an ideal scenario – the business stores your credit card information, and the moment there is a transaction initiated, it bills you without any need to go through a 3D secure page, need your CVV for authentication. One click purchase. For a business, it ensures high conversion rates – the shorter the time between intent to purchase and the completion of the actual purchase, the greater the likelihood that the purchase will be completed.

The problem is that many Indian businesses don’t have the same option: the express checkout functionality, which some Indian businesses are now adopting (Cleartrip was possibly the first;Flipkart had done it too) still takes customers through a “Verified by Visa” or “Mastercard Secure” layer, and on mobile through the one time password process which often doesn’t work (I’ve never been able to use it successfully, because). This has led to many businesses taking the closed wallet route: they encourage customers to use a single transaction to add money to their wallet, and then just debit from the wallet to complete the transaction, but don’t allow customers to withdraw the money as cash. Companies like Infibeam, IRCTC, Paytm, MakeMyTrip, Mobikwik, Flipkart have all launched closed wallets.

I’m not sure of how this works and how they’re working the system – there might be loopholes; perhaps in dealing with the international websites, you’re making an international transaction. Just because they’re displaying rates in an Indian currency and have licensed content for the Indian market, doesn’t mean that the billing is being done in India, even though the seller and the buyer in a marketplace like an app store might both be Indian entities. This could also mean that India might be losing out on tax income from businesses like Google (via Ireland?), Facebook, Apple, among others, and there is some kind of incentive to route billing through International payment gateways.

What I think needs to change is that the regulations need to apply equally to those doing businesses in India and/or with customers in India. Ideally, the second layer of authentication should go.