US based digital payments major PayPal will start winding down its payment operations in India this week, said a news report . The company will start closing down its India operations starting February 6, according to anonymous sources quoted in the report.
PayPal’s India operations include payments gateway and aggregator services for online merchants and brands. It incurred losses from the domestic payments business in FY19. The losses were mostly on the back of high costs of merchant onboarding, infrastructure expansion and new talent acquisitions.
The company will soon initiate a restructuring exercise and, from 6 February, will start notifying Indian merchant partners who avail of its gateway services about plans to terminate contracts by April 1, 2021, the spokesperson told Economic Times. PayPal’s India tech centres across Bengaluru, Chennai and Hyderabad along with its business development teams, will now focus on global transactions and remittances business. Last year, the company terminated the services of their third-party staff citing closure of domestic projects.
PayPal only entered India’s domestic digital payments market in November 2017, one year after the Indian government had demonetised nearly 85% of the currency in circulation at that time. Sensing the opportunity, PayPal began processing domestic payments in the country. However, the market, by then, had gotten cluttered with several players such as BillDesk, PayU and Razorpay, while Paytm had come to the fore as a digital wallet, besides the multitude of third-party payments apps on the unified payments interface (UPI) network.
““In the early days of the pandemic when the government’s measures to curb the virus were gaining momentum, we started planning on how we can protect our business and optimise our growth here,” the spokesperson was quoted as saying.
In December 2020, PayPal reportedly told its card network partners that the company was ‘pausing’ its domestic business, and will stop onboarding new merchants from March 2021. Instead, PayPal will scale up its existing cross-border trade business for small enterprises to gain a significant share of the inward remittances market, said the report.
“India is a very crucial market for PayPal, and after a thorough analysis, we decided that we are best placed here to focus on enabling cross-border trades and exports for Indian businesses aiming to go global,” added the spokesperson.
The company’s domestic services will shut shop by the end of this fiscal year except for dispute resolution related processes.
Cross border remittances is now a huge focus area for the Reserve Bank of India as well. RBI has identified cross-border payments as the second cohort of its regulatory sandbox (RS) program in a bid to make international remittance channels and make them more accessible and affordable. Under the program, which commenced earlier this year, banks, fintech and technology companies can collaborate and run real-time experimental pilots under the supervision of a central bank team who can then determine the efficacy of mass-market applications based on the results. Even the National Payments Corporationof India (NPCI), the digital payments body, is focused on growing solutions in this space now.
India is the largest recipient of inbound remittances across the globe accounting for 15% of global share. In the year 2019, India received $83 bn and in the first half year of 2020, has received $27.4 bn. Further, the daily average turnover of OTC foreign exchange instruments in India is approximately $40 Bn.