The Battle for the Billion – Payments in India heats up with Google Tez

A week ago Google launched “Tez” (meaning “fast” in Hindi), as yet another player in the payments segment in India. Indian payments industry has seen major growth over the last few years, thanks to the e-commerce boom. And e-payments is projected to be $500 Billion by 2025 – a market that can definitely accommodate multiple winners.

Google

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A few questions I have been trying to find answers to since the launch are,

  • How does Google Tez stack up against the first movers, and the major players in this segment?
  • Is it too little too late for Google?
  • Will it help/hurt Google?
  • Will Google be satisfied with just the conquering the payments on smart phone market?

Before getting into these questions lets discuss the two key payment services in play here.

Unified Payments Interface (UPI) and UPI based apps: UPI is a feature that allows consumers to perform funds transfer, where the sender doesn’t need the bank details of the receiver. The funds transfer happens between two virtual payment address. Key differences between UPI and the other key methods of payments (NEFT/RTGS) are described here. UPI is currently used by 50 Indian Banks.

Apps that are predominantly UPI based, just act as a pass through layer for payments to happen. Examples are Google Tez, BHIM, PhonePe

e-Wallets: These are apps that store money and act as digital wallets, and will need to be topped-up from time to time with cash from either bank accounts or credit cards. When a money transfer is made, it moves from the sender’s e-Wallet to the receiver’s e-Wallet. PayTM is an Example.

 

BHIM was launched by the Government of India, and had quite a lot of success due to its simplistic design and interface. It is an app that supports only UPI transactions.

PhonePe, since its launch has been giving BHIM tough competition. It has richer functionalities for consumers from sending money to paying bills.

PayTM, ofcourse, is the one to beat in the Payments sector in India. PayTM is an e-Wallet, and has a different use case, as explained above. It has the first movers advantage and big money via investors such as Alibaba, and the might to take on Google at this stage.

Google Tez Features:

Tez takes a different approach to the Payments customer journey, perhaps to steer clear of the competition with PayTM. Tez is built on top of UPI, so users transfer money from one bank account (connected to their Tez app) to another, without storing money within Tez.

Tez supports a “Cash” mode that allows money to be transferred from one Tez user to another using Audio QR technology (AQR), which is supposedly more user friendly and secure. This is what one would need to pay the shop keepers in the local market.

Apart from this Tez supports several Indian Regional languages, has a fraud prevention feature called Tez Shield, and also provides a chat like interface.

Are they late?

Why would Sundar Pichai, someone who understands the Indian market come to the party so late? And is there hope?PaymentsTrend

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I believe, Google has the following advantages,

  • They have positioned themselves cleverly in the UPI space which is not the strategy that PayTM are currently taking.
  • As a feature within Google Tez, they support “Cash Mode“- which allows users to transfer money to nearby Tez users through a QR Code. India loves cash and this approach differentiates Google from the rest of the UPI lot.
  • As a further advantage, google has better data about every smart phone user than the Government of India or PayTM. If they put that to good use, they would be able to provide more contextual customer journeys.
  • Sundar Pichai’s understanding of the market, and Google’s might is a definite advantage on top of these.

It remains to be seen if they can accelerate from here, to conquer the UPI segment first, and eventually the smart phone payments segment in India.

The Next Billion

There are ONLY 300 million smart phone users in India. There are close to 650 Million mobile users (including smart phone users) and about a Billion who don’t have a smart-phone in India.

That is one mammoth market that Google would not want to miss out on.  But the advantages Google have with smart phone users (consumer data), is not something they can extend into the next Billion. So, one way to do it is through acquiring a key player in that market.

There are a few trying to conquer this space that shouts out for M-Pesa like innovation, and MoneyOnMobile is one key player. When I met the CEO of MoneyonMobile earlier this week, I was surprised to learn (inspite of knowing the Indian market) about the amount of efforts and capital it took to get the Next Billion on board. However, as Bernard describes in his article on MoneyOnMobile, the winner will make it big. And to me, Google might have to conquer that market through acquisition.

Google are not the first movers, so they are always going to play catch up. But they could do it right first time. Watch this space.


Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

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