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From ecommerce to entertainment to food and now to wallets, Amazon is leaving no stone unturned to penetrate the Indian market. The Indian arm of the world’s biggest ecommerce company Amazon.com, Inc.  has secured a licence from the Reserve Bank of India (RBI) to operate a prepaid payment instrument (PPI).

As per the RBI website, Amazon Online Distribution Services Pvt. Ltd secured the licence late last month. This makes the ecommerce behemoth the latest entrant in the country’s booming digital payments space.

The development was first reported by Medianama.

Sriram Jagannathan, Vice President, Payments, Amazon India, in a response to Inc42 stated, “We are pleased to receive our PPI license from the RBI. Our focus is providing customers a convenient and trusted cashless payments experience. RBI is in the process of finalising the guidelines for PPIs. We look forward to seeing a continuation of the low limit wallet dispensation with simplified KYC and authentication. This will allow us to help customers adopt digital payments at scale and thereby contribute towards making India a less cash economy.”

The announcement follows the launch of its Pay Balance service last December in order to boost cashless transactions. While Pay Balance works in a similar manner to other mobile wallet services, it was restricted to transactions on Amazon.in only.

Commenting on  Pay Balance, Sriram said, “We recently launched Amazon Pay Balance where customers can fund their in-site pre-paid balance using Internet banking and credit or debit card for smooth purchases and payments. With this, customers can go cashless and enjoy fast and easy checkouts, quicker refunds coupled with a secured shopping experience only on Amazon.in. We will continue to look for ways to improve customer experience and increasing digital payments leveraging our PPI license.”

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However, the ecommerce player did not disclose if Amazon Pay would also cover other areas such as bill payments. Sriram, however, mentioned in his comments, “We hope the government and RBI would continue to encourage multiple ways to shift consumers from cash behaviour by recognising the value of digital wallets, used especially for making small value payments to large merchants like ecommerce, government, IRCTC, utility or insurance companies.”

Payments Step By Step

Ever since Amazon introduced its Pay With Amazon in India feature in India in October 2014, the ecommerce behemoth has been taking baby steps towards penetrating the digital payments market in the country. The first feature allowed customers to use the information already stored in their Amazon account to checkout and pay conveniently on ecommerce sites.

Here’s a quick look at the other steps taken by Amazon in the direction of digital payments –

  • Amazon made its first investment in India by investing $10 Mn in Bengaluru-based gift card technology and retail startup QwikCilver Solutions. QwikCliver powered the e-gift cards for transactions on Amazon. In. As of now, Amazon has merged e-gift cards into Amazon Pay.
  • Hired former Citi banker Sriraman Jagannathan, in February 2016, to head its payments business, to spearhead the launch of the digital wallet. Jagannathan was instrumental in launching telecom operator Bharti Airtel’s digital wallet, Airtel Money, in 2012.
  • Also acquired Noida-based payment gateway firm EMVANTAGE Payments Pvt Ltd, for an undisclosed amount in February 2016. As part of the deal, Emvantage’s employees joined Amazon’s payments team to develop solutions, tailored for the Indian market.
  • Applied for a semi-closed wallet license with the Reserve Bank of India in March 2016.
  • Launched Amazon Pay Balance in December 2016, a payment option similar to how mobile wallets work but limited to Amazon-based transactions.
  • Received the PPI license from RBI in last week of March 2017 to launch a digital wallet.

Will Amazon’s Wallet Be Like Paytm Or Flipkart’s PhoenePe?

Amazon has not specified if its wallet will be used just for ecommerce on the site or also for other services such as bill payment. If, it is only relegated to facilitating ecommerce, it will probably  turn out to be yet another accessory of an ecommerce major just like PhonePe for Flipkart and Freecharge for Snapdeal.

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Flipkart acquired UPI-enabled PhonePe in April 2016 in order to remove hurdles around payments and bolster its ecommerce business. Similarly, the now-struggling Snapdeal, had acquired mobile wallet FreeCharge in September 2015 for over $450 Mn to boost commerce on the platform. Incidentally, both Snapdeal and FreeCharge are up for sale currently.

Similarly, Gurugram-based online managed marketplace, ShopClues, acquired Bengaluru-based mobile payments startup Momoe Technologies last July to bring innovative digital payments for its merchants and customers on its platform.

However, being limited to ecommerce, none of them has been able to come close to replicate the success of Paytm’s digital wallet which is now estimated to have over 200 Mn users. Co-founder Vijay Shekhar Sharma posted on the Facebook Page that Paytm, having crossed 20 Cr. Paytm customers, is aiming to reach to 50 Cr Indians by 2020.

As a per a recent report by Google and Boston Consulting Group, the digital payments industry in India is projected to reach $500 Bn by 2020, contributing 15% to India’s GDP. Digital payments in India have exploded after the Prime Minister’s demonetisation move last November, which forced many users to switch to digital payments to tide over shortage of cash. No wonder, India is witnessing an influx of players to leverage this opportunity.

Instant Messaging app WhatsApp is the latest entrant and is expected to launch a peer-to-peer payment system in India powered with the Unified Payments Interface (UPI) in the next six months. Similarly, Sweden-based Truecaller, which counts India as its largest market, also introduced a new UPI-based mobile payment service ‘Truecaller Paylast month through a tie-in with ICICI Bank. How Amazon will go about acquiring a slice of this pie – trough the Paytm way or the Flipkart way – will become clear in the coming days.

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