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Digital payment and e-commerce firm Paytm could be hit as Uber began accepting credit-card and debit-card payments since Sunday.
The taxi-hailing application has emerged as among the largest clients for Paytm. Customers can still pay for their rides using Paytm’s digital wallet.
Coinciding with the development, on Monday, mobile payment firm MobiKwik announced it had partnered Uber to enable not just credit-card but debit-card payments, too. While the base of credit-card users is small, debit-card users are many more. This could further hit Paytm's business. Paytm was not available for comment.
When Uber launched in India, the company asked its users to save their 16-digit credit-card numbers and the CVV (card verification value) in the application. Every time they took a ride, they were charged through the credit-card details saved. But unlike international markets, in India, this arrangement ran foul of the Reserve Bank of India (RBI)’s payment norms, which require an additional level of authentication, along with the credit-card number and the CVV.
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After the RBI raised this issue, Uber stopped this mode of payment in December 2014 and tied up with Alibaba-backed Paytm to offer digital wallet, which works like a pre-paid card, as the only mode of payment. Over the last eight months, Uber has been working on its back-end technology to design its application according to the RBI’s requirements. Taxi-hailing application Meru recently launched a similar option on its network.
Uber users can save their credit-card numbers and CVVs in the application and after a ride on the Uber network, they will be prompted to enter either the one-time-password (OTP) — sent to their mobile and email address — or their I-Pin for their cards to be charged. Though Uber is said to be testing cash payments in some cities such as Hyderabad, it has yet not launched the option nationally. Its rivals such as Ola and Meru allow customers to pay cash. Also, the option to key in all the credit-card details every time is not available. The company has assured users it will keep their financial details safe.
Those extra-cautious while saving their details in the application may prefer paying through a digital wallet, while others may find topping up the wallet a hassle. There are others who may continue to use the wallet, because often there is considerable delay in receiving the OTP and the experience is not seamless.
Sivarama Krishnan, executive director of audit and consultancy firm PwC, said though Paytm had its own market, the company got a boost from the subscribers on Uber’s network, which moved to its wallet. “But it was not sustainable. If I can enter all the details on the Paytm website and application, I can do it directly on Uber as well now. And the additional authentication is only making it secure for me, so why will I not do it?” he said.
Krishnan also said for international travellers, it was a bonus, since they would be able to now use the application abroad as their card-information was stored there. “For the domestic traveller also, there is nothing to lose,” he added.
“It’s not a win or loss as Paytm should not be targeting people who are already credit card users. They have to find their own niche,” said Krishnan.
In a recent interview to Business Standard, Paytm Chairman and managing Director Vijay Shekhar Sharma had said that there were only 20 million credit card users in the country, compared to 81 million Paytm users. “Our goal is to provide online experience to even those consumers who do not have a bank account.” Sharma perhaps already has this loss factored in.
