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PayPal starts payments aggregator business for merchants in India

Global payments company PayPal is starting its domestic India operations as a payments aggregator and will be offering its services to merchants. PayPal has been in India for over 10 years now but its Indian users were only engaged in cross-border payments for businesses selling goods and services abroad.

“We’re coming to India as a value-added payment aggregator in India and have the appropriate licences to do that,” country head and managing director Anupam Pahuja said in the press conference. “{s we move ahead, we are looking at the PPI licences (wallet licence) and looking at the regulations very carefully. We will examine and see what the next step is,” he added.

Right now, for merchants, PayPal will be offering One Touch payments, buyer and seller Protection, free refunded return and a 180-days dispute resolution window. The company did not give out details on the number of users and merchants in India but globally, it has 218 million active users and 17 million merchants accounts. These are accounts that have been active for 12 months.

In India, PayPal has roped in MakeMyTrip, Yatra, PVR Cinemas, BookMyShow, and Firstcry as their first domestic merchants and will have the “Checkout with PayPal” option. Pahuja added that the company will be adding more merchants in January. PayPal says that it expects 25% jump in conversion rates for merchants in India.

Meanwhile Paytm, arguably India’s largest payments company right now, has around 280 million registered users and 5 million merchants.

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Pricing for merchants

PayPal did not give specifics on how it would charge merchants. “Our rates for countries are different from everywhere in the world. And they are commensurate with the industry practices. In India, it has similar rates as everybody else. And the premium offering that we’re bringing to the table, you should look at it as the value we are bringing inherently for our customers,” Pahuja said.

Indian payment aggregators such as Razorpay and Instamojo charge merchants a flat fee of 2% per transaction. Other value added services such as recurring payments, reports etc will be charged extra.

However, Rohan Mahadevan, general manager for Asia-Pacific region, said that pricing for merchants will be slightly higher than peers in India. He attributed the higher pricing to the increased risk liability PayPal will be taking for merchants with products such as free refunded returns and the 180-day resolution window.

But here is an idea of how the company charges merchants in the United States and transactions US dollar:

  • For web payments and for up to monthly sales of up to $3000, the company charges 4.4% per transaction and the fixed fee.
  • For monthly sales above $3000 and between $10,00, it charges 3.9% per transaction along with the fixed fee.
  • Above $10,000 and between $100,00, a charge of 3.7% per transaction along with the fixed fee.
  • Above $100,000 it charges 3.4% per transaction along with the fixed fee.

For US dollars, it charges a fixed fee of $0.3 per transaction.

Credit products

Meanwhile, Pahuja said that PayPal will also be bringing in its other merchant products to India including credit and working capital for merchants. It also has a product which offers credit to buyers to complete a purchase and pay later, similar to PayU’s LazyPay in India. Note that the credit business is pretty significant for the company. At the end of the September quarter Q3-2017, PayPal had credit loans receivable of $6.7 billion, with $830 million in merchant lending receivables. The credit business also accounts for 2-2.5% of PayPal’s total payment volume (TPV) which stood at $114.04 billion for the quarter ended September 2017.

One Touch payments and two-factor authentication (2FA)

One Touch payments is a PayPal product where users can complete purchases faster. Through this, it allows users to remain logged into the system to make payments. Globally, One Touch payments is a significant driver for PayPal with 70 million consumer accounts opting in and 6 million merchants who accept One Touch.

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However, One Touch payments will not be working the same in India and will have to abide by the Reserve Bank of India’s guidelines on 2FA for online payments. Note that the RBI eased norms for payments made using NFC-based or contactless cards on POS terminals and said that transactions below Rs 2,000 will not need an additional factor of authentication.

“We’re working with both offline and online regulations with the RBI and our partner banks in India to make it as similar as possible with the Indian nuances built into it,” Pahuja said. “There are two parts to One Touch. First is saving your details where you don’t have to enter the details for every purchase. That part will work just as it is everywhere in the world. The difference is on the OTP side where users need to punch in those 4 digits. Currently, in the system, you have to punch in those numbers. As the Rs 2000 limit that the RBI is removed, the One Touch payments should work just as is,” he added.

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