Nitin Gupta, Country Head , PayU India, talks to Mehak Chawla about new developments in the online payments industry and the impact regulations are having on the e-commerce space
How is the online industry in India evolving, given the enthusiasm that we are witnessing in the e-commerce space?
It was about 14 years ago when India recognized the potential of accepting payments online and the trend took off. If you analyze the internet phenomenon across the world, the first thing that happens when people go on the web, is that they look for jobs. That is why the fist Internet company to get big is often a classified company. The next thing is travel purchase; thus, the next web company that makes headlines is a travel portal. Since people start getting more comfortable with online buying, these two things are followed by trends around e-commerce. India is in the third phase as of now. There are more people buying online, and more merchants trying to sell online. This is where the payments wave comes into the picture. E-commerce is actually a small component of the online payments industry. There is a gamut of other products and services that can be purchased online, like school fees and other professional services.
The online payment industry in India is far more regulated than in some other countries. What is the impact of regulations in this industry, particularly those around security?
Today when a payment happens online, there are three primary means of payments—credit card, debit card and Internet banking. In India, it is imperative to have an acquiring bank (the bank that facilitates the transaction through its machine) for any card-based transaction. That is not true of other countries. In the U.S. for instance, you can connect to a Visa or a MasterCard directly. This regulation is of great significance because in order to go online, a merchant has to go through a KYC process. This KYC process is defined by the acquiring bank. What happens then is that banks opt out of risky categories like tech support, for instance. As a result, if you are a tech support merchant in the U.S., it is easy to go online, but in India, it is quite difficult.
On the security front, until 2009, all you needed to do was to give your card details and your CVV and the transaction would go through. Now, there is a second layer which is the second factor authentication or the 3D secure password. RBI mandated that any online transaction must have a second level of authentication. The good that came out of it was that frauds decreased significantly, but the bad thing is that in case of a second-level authentication, the consumer cannot raise a charge back. We are looking to solve some big problems related to charge-backs in the Indian payment industry.
What are the challenges that the online payments industry is facing, especially in the wake of PCI-DSS?
Earlier, if you sent 100 transactions to a payment gateway, only about 55-60 of those would succeed. This was a big challenge plaguing the online merchants, and we have been able to solve it to a great extent with our solution. A good example is the case of Ferns N Petals: they halved the strength of their call center that used to follow up on failed transactions after they implemented our solution. PayU aggregates all the payment options and in turn gives it to merchants.
With regard to PCI-DSS, we are helping our customers in getting the certification by launching a set of libraries which we give to our merchants. Using these, the merchants collect the card data on their sites but when the user hits the ‘buy now’ button, the data doesn’t hit their servers, it hits ours. Since the card data is not fed into their network, the scope of PCI-DSS reduces by over 90%. So, we are getting our merchants PCI-DSS certified in two weeks. We are the only organization providing this feature in India; it is completely developed in-house and it is one of the most secure solutions in the world.
What is PayU’s strategy and future outlook for the Indian market?
We can’t talk about revenues because we are only 12 months old. But in one year, we went from being number 14 to being number three in the online payments space.
Currently, as PayU, we do more transactions in a day than IRCTC. We are the number three player in the overall aggregation space and the topmost player in the e-commerce space (including travel). We want to be number two in the next 8 months or so. Our current market share is 23% and we want to take it to 50% (in e-commerce and aggregation space) in the next couple of years. The other area of interest for us is that there are only about 10,000 merchants in India who are online today. We want to take that number up to a million. Also, there are fewer than 5 million customers who transact online today for non-travel, non-recharge products. In the next three years we want to enable 20 million buyers across categories.
We are betting on mobile to fuel our growth in the coming years. As of 12 months ago, the number of transactions that originated from mobile phones was less than 1%. Today it is close to 3.6%. We expect this number to reach15% in the next two years. Things like Interbank Mobile Payment Service (IMPS) will take off and contribute a good deal to the mobile trend.
