NUE: Payments Superheroes in the Making ⚡️
They're coming for you, NPCI.
Welcome to our action-packed superhero-themed write-up on the super trending buzzword of 2020 - NUE.
Trust us, this is theoretically and literally, a payments civil war! 🦸♀️⚡️🦸♂️
Not wasting a lot of time, let’s quickly skim through what is NUE (most of you will know this but the excitement makes us want to read it again and again!)
New Umbrella Entity, as the name suggests, plans on building a platform with various small consortiums building solutions for the currently monopolized Digital Payments market of India.
Here are some important rules of this war:
The fight is between an existing non-profit NPCI and to-be formed for-profit NUE.
Every superhero will be fighting for one common goal of making the already decent retail digital payment even better and efficient.
Eligibility to become one of the superheroes is simple, each one of them should have some payment-related use case. The application date for participating in NUE ended on 31 March 2021.
Any entity with more than 25% of shares will be a promoter.
The NUE’s minimum paid-up capital should be Rs. 500 crore and no one entity can hold more than 40% of the investment.
The detailed business plan war strategies are still to be decided upon.
Here’s what we expect:
Wait, Why?
So far we know that a few companies, big or small, will be applying for the NUE license. They won’t be fighting alone, they will build a big strategic army to fight against the Thanos of Digital Payments (NPCI).
The twist here is, these armies will internally compete to be the best ones as well.
Oh, and another twist is - all the players currently participating in NUE are somehow intertwined with NPCI, so much so that the banks competing against NPCI are their very own shareholder.
With an existing smooth digital payment mechanism in place, which is growing multi-folds on a monthly basis, why is an alternative even needed?
Now comes the biggest question of this era, to RBI
Well, we’d like to answer this question using another image —
Yup, that’s what happens when we depend on just one LARGE system that accounts for over 12% of world trade volume.
Imagine NPCI being the only one to facilitate national digital payment volume. One small glitch can affect billions of transaction volumes. An alternative is chaotic but extremely important.
Now let me set the plot for you before we move into the details of our consortiums.
On one side we have India ki shaan and maan with the naam - NPCI
Strengths: HUGE existing user base. You might as well call it a demographic army.
Super Power: Being not-for-profit, they can afford to provide free services to retailers for life.
Weakness: Huge dependency on companies like GPay and Paytm for running its base products, who now plan on having their own license.
On the other side, we have these big and small groups of entities teaming up to compete against each other, as well as NPCI.
Strengths: Private business minds coming together from all over the segment with expertise and reach to an even larger set of tapped and untapped audience.
Super Power: Heavy on arms and ammunitions - Technology.
Weakness: Migration of existing NPCI user base to something that is a for-profit entity and might exploit retail investors for business performance.
Not everyone will make it through - we assume RBI will select 2-3 consortiums who’ll make it to the final battle.
For us, the consumers, we will most likely be given an option on which team we want to choose while making a payment. But we do hope this competition will leave us full of easy-to-use products with some brilliant tech-led use cases.
Chalo, ab maidaan mein!
Now that we've looked at the rationale behind the need for a new payments entity, it's time to look at who the actual contenders vying for the payments mantle are.
It's time for —
drumroll 🥁🥁🥁
#1 Ferbine - United Payments for India
The Team: Led by the Tata Group, this group of avengers make for a power-packed team. You've got Airtel, Mastercard, HDFC Bank, NABARD, Kotak Mahindra, PayU & Zeta.
The Vision: A pan-India payments network like UPI, but focused on the underserved population lacking access to smartphones.
The Plan of Attack:
Create a universal payments ID.
Mobile phone-based universal point of sale (PoS) system.
Sound-based payments solutions for those who don’t own a smartphone.
Harness the last-mile business correspondent (BC) network across semi-rural and rural India.
The Superpowers:
The Tata Conglomerate is like the infinity gauntlet in the promoter's hand.
Mastercard, PayU come in with some strong payments experience.
Airtel Digital, Flipkart, Mastercard, PayU bring some strong tech capabilities to the team.
HDFC Bank & Kotak Mahindra Bank flex their status as few of the largest commercial banks in the country.
Our Take:
This consortium is a pretty promising one with a variety of proven capabilities. Their vision is also unique and seems like a logical step to further digital payments in India.
#2 Foster Payment Networks - Band, baaja, payments.
The Team: Led by India's first fintech unicorn (and probably decacorn), Paytm, and Electronic Payment & Services (EPS) this payments powerhouse is a pretty powerful party. (now that's an ace tongue-twister hah!)
Note: The shareholding here is based on estimates from news articles.
The Vision: To build products that cater to the “lifecycle of the money – from savings to investment.”
The Plan of Attack:
A common digital rail for various products like payments (of course), loans to small borrows, life insurance, investments, etc.
Create solutions that revolve around savings behaviour and market behaviour.
The Superpowers:
Paytm, without a doubt, is like the Iron Man of payments. An interesting fact is that they command about 15% of the UPI payment volumes in the country.
Ola Financial brings some digital wallet know-how with a lot of customer behaviour data from Ola.
EPS & Zeta has some solid financial infrastructure experience.
IndusInd, Paytm Payments Bank, Suryoday Small Finance Bank account for reasonable banking know-how.
Think360 is an interesting addition with its data analytics capabilities. Think of them maybe as the new kid-on-the-block Spidey.
Our Take:
All in all, we'd say Foster Payment Networks is a decent applicant with relevant capabilities. The vision seems a bit vague to us at the moment, but hey, this civil war is just getting started and who knows what new plot twists might emerge.
#3 MoPay - Hopefully, more than UPI
The Team: Co-led by banking champions ICICI Bank & Axis Bank this consortium has some kickass payments superheroes we'd say.
The Vision: Build a UPI-like settlement system in India's digital payments space for SMEs, Merchants & Consumers.
The Plan of Attack:
A faster and scalable settlement system aimed at small businesses and merchants.
The Superpowers:
ICICI & Axis are the big guns when it comes to UPI payments processing in India. For them, it's like a daayein haath ka khel.
Visa with its global payments network and card processing powers is a valuable hero.
Pine Labs & Bill Desk, another two payments powerhouses in merchant commerce & payment gateways, respectively. Billdesk is also a key processor on NPCI's Bharat Bill Pay System - conflict alert!
Amazon might seem like a curveball, but they've got the tech, the distribution channels and also some minor UPI cred.
Our Take:
Not gonna lie, a pretty strong contender this MoPay. Some super-effective superheroes, but a slightly unoriginal plan. But hey, there's a lot to be said for taking what already exists and making it even better. Why reinvent the wheel? Add in some kickass engines and turn it into a Koenigsegg Jesko Absolut (Sagrika says this the fastest car in the world and Sagrika is never wrong about cars.)
#4 Vishwakarma Payments - translates to ‘all maker’. We'll see.
Naam toh kaafi bhaari hai, manna padega 🙌🏼
The Team: Led by payments tech provider FSS, this consortium sort of seems like all the odd-man-outs clubbed together. While no details on shareholding have been disclosed, these are the companies coming together for the fight:
FSS, Chola Finance, Zoho, Zerodha, Razorpay, Ujjivan Small Finance Bank, Airpay
The Vision: To build an agile platform for seamless digital payments
The Plan of Attack: TBD (We really wish we had access to the application documents of these consortiums. What a gold mine that would be!)
The Superpowers:
FSS & Razorpay come in strong with the payments experience in payments processing and infrastructure. Airpay follows a few steps behind.
Zerodha is the Ant-Man of the lot. A pioneer in the fintech space over the years, we won't be surprised if this bootstrapped bomb had a bada dhamaka up its sleeve. 👀
Chola & Ujjivan, the two traditional financial institutions - respectable acumen with consumer finance know-how.
Zoho brings its cloud-based software-as-a-service powers to the fight. They could bring a new perspective to the payment war.
Our Take:
This consortium, at first glance, seems like a bunch of misfits. Knowing what they've planned might surely help clear things up, therefore we're not writing them off yet. Underdogs can also win wars with smart moves, after all. 😉
#5 RIL-led Consortium - There's a lot in just the name.
(No fancy names here because RIL be like, naam toh suna hi hoga 😏)
The Team: We wouldn’t be wrong to call this group as strong as “The one above all”. Led by Reliance, we see the newly made RIL friend Facebook and Google participating with minority stakes of 20%. We also have SoHum Bharat, an outcome of PCI and Infibeam’s collaboration, joining the big league.
The Vision: Become a global payments player.
Plan of Attack: Will likely offer payment services overseas, probably pitting it against giants Visa and Mastercard in some markets if it gets the operating licence.
Superpowers: This need not be described.
Reliance has successfully managed to reach out to the last mile Indians by some or the other conglomerate company.
If not, we have Facebook-owned Whatsapp which is known to have the largest user base in India of a whopping 340 million people.
Google Pay currently carries on 36.11% of the UPI transactions currently, becoming the second-largest by missing a few points from PhonePe.
Infibeam (better known under brand name CCAvenue) is one of India’s largest MNC Fintech players with an existing global reach.
Not to forget the tech capabilities of Google and Facebook, it’s an added bonus to have all the easy access.
Our Take: Attacking directly on the soft-spot of NPCI’s recently launched international payment plans with a much stronger force and access sounds like a super strategic move. We’re excited to see the strongest of players trying to make their way in International Fintech. WIth existing infra, it won’t be a biggie for them to quickly test grounds in Lending space as well.
#6 iServeU NUE 🧐 - Anonymity retained.
This is the sixth consortium led by a technology startup iServeU. We were unable to capture the team and strategy for this strange consortium.
Our Bets 🎲
Now that we've had a good look at the payments civil war warbands, it's time to place our bets on who we think might win the NUE mantle from RBI. Word on the street is that the regulator will be awarding two licenses, but we are betting on 3:
Ferbine - The essence of Tata-led entities reaching to the underserved is surely something that is the need of the moment and, government-friendly.
MoPay - Fintechs are known to cause existential crises to banks for a long time now. RBI being the guardian angel of these banks should allow them a sweet chance to compete with NPCI by building a straight-up UPI-like product.
RIL-led Consortium - It’ll be a treat to watch India go International with such a strong force. We’re rooting for this one 💛
Only time will tell what transpires in this action-packed saga - who will pull out the wildcards? Who will utilise their superpowers, how and when? Who will emerge victorious and who will accept defeat?
All we can say is that the future of digital payments in India is going to be a super exciting one with the innovation about to be brought in. Grab some popcorn, a tub of ice cream and sit back, folks - this movie is going to be a long one.
That's it for this one peeps! We hope you had as much of a fun time reading this as we had in writing it (and making all the memes ofc.)
Who are your bets on in this NUE race? Leave your responses and reasons in the comments.
If you're a Marvel stan like us, do share this piece with your fellow fintech+Marvel nerds and ask them to be nice and hit subscribe as well 😇
I think ferbine & paytm will get the license.
Hi Guys, Nice writeup. The 6th company mentioned is not iServe Financial but is iserveu technology. A subsidiary of Niyogin ( A listed company with 600cr mcap)