Amazon is joining hands with ICICI Bank and Axis Bank and several others to create a national payments network that will rival the National Payments Corporation of India’s (NPCI) dominance in the retail payments industry in India, the Economic Times reported. The consortium will apply for a New Umbrella Entity license from the Reserve Bank of India (RBI) at the end of this month, to set up an alternative real-time payments system to the NPCI’s Unified Payments Interface (UPI).
Citing unnamed sources, the report said that Visa India, the National Stock Exchange, BillDesk and Pine Labs will also be part of the consortium led by ICICI and Axis. It said that the consortium is looking to build a UPI-like settlement system for small and medium enterprises, merchants and consumers. The sources said that the aim of the consortium will be to create a faster settlement system that can be scaled up to manage the surge in digital payments. With the government removing the merchant discount rate on UPI transactions last year, private entities want to set up a rival umbrella payments entity which can be profit-making as compared to the current model under the NPCI, the report.
While Amazon’s UPI service in India processed over 46 million transactions worth Rs 4,044.38 crore in January 2021, ICICI Bank processed 6.22 million transactions worth Rs 1,835 crore and Axis Bank processed 5.23 million transactions worth Rs 560.7 crore, as third-party UPI players. As anchor banks, ICICI Bank processed 152.06 million UPI transactions while Axis Bank processed 173.38 million transactions last month, according to NPCI data.
As of November 2020, ICICI Bank has a 7.12% stake in the NPCI while Axis Bank has a 1% stake in the NPCI, PineLabs, Amazon Pay and IndiaIdeas.com (BillDesk) each have 0.44% stake in the NPCI. If their application is approved, each entity may have to divest their stake in the NPCI so as to avoid a conflict of interest.
So far, apart from the SBI-HDFC-BoB banking consortium, Reliance Jio Infocomm and the Tata Group are reportedly in the running to apply for an NUE license. It was also reported that tech giants like Google and Amazon may also pickup a minor stake in one of these applicants. The only entity that has formally announced that it would apply for a license is So Hum Bharat Digital, which is backed by veteran payments industry executives Navin Surya and Vishwas Patel and Yes Bank.
According to the RBI’s NUE guidelines, the new license holder to operate and develop retail payments platforms can be profit-making unlike the NPCI which is currency a not-for-profit entity. The NUE is expected to develop interoperable payments solutions, that can work with the NPCI’s existing payments platforms, to help grow the digital payments pie in the country by attacking new use-cases and target markets. While the RBI has invited applications till the end of February 2021, an expert committee will evaluate the applications after which the Board for Regulation and Supervision of Payment and Settlement Systems will take a final call on granting licenses, within a six-month period. The NUE guidelines state that the license holder will need to create new solutions for ATM networks, point-of-sale (PoS) services, Aadhaar-based payments and remittances.