Promote competition

Govt is turning anti-consumer in digital payments

It is unfortunate that, at a time when new investment and business confidence are required in order to recover from the effects of a devastating pandemic, the government appears to have stepped up anti-investor protectionism in the digital sector — and, in particular, in the fast-growing digital payments sector. The National Payments Corporation of India (NPCI) has recently set a cap on how much of the transaction volume can be accomplished through any particular third-party app. This will affect the business model of multiple such providers, such as PhonePe and Google Pay. It will not, however, affect their competitor Paytm, which is not a third-party app but a mobile wallet. This has naturally led to questions about arbitrariness.

While PhonePe and Google Pay, both of which have shares in excess of the 30 per cent cap set by the NPCI, have been given ample time to comply with the order, the basic principles underlying it are faulty and should be re-examined. Naturally, a monopoly on payments infrastructure would be dangerous. But a 40 or even 50 per cent share is not a monopoly, particularly in a sector with ease of adoption like third-party apps. The NPCI has overstepped here. It is not within its competence to deal with competition issues; there is an entire Competition Commission for that purpose. This order will also raise the probability of UPI payment completion failures, which were already a serious and growing problem. Given that payments systems are in their infancy in India and have a lot of room to grow, it is important that consumer choice be given full rein if India does not want to wind up with a substandard payments architecture that does not serve its needs. This should be the regulator’s sole concern, but sadly it does not seem to be the case.

That such orders are a product of the current political mindset is clear from the statement of Union Finance Minister Nirmala Sitharaman to the annual general meeting of the Indian Banks’ Association: “Whoever needs a card, RuPay will be the only card you would promote.” This is an unacceptable intrusion not just on banks’ business choices but also on the options available to consumers. The FM added: “I would not think it is necessary today in India when RuPay is becoming global, for Indians to be given any other card first than RuPay itself.” This is a serious overestimation of RuPay’s global reach. Maintaining such a push at a time is anti-consumer and sends out the wrong signal to investors. Given that such a direction for policy looks inevitably like an attack on Visa and MasterCard, further questions will begin to be asked about India’s status as a hospitable location for investment. There is no point in senior officials pointing to ease of doing business rankings or claiming that “Aatmanirbhar Bharat” is not about protectionism when the government’s actions do not appear to live up to this rhetoric. The Indian state should promote open, regulated competition. It has had no success in the past creating efficient national champions, and it will have no success in the future.