Uber looks to partner digital wallet, payment gateway companies
Global taxi-hailing company Uber is in talks with firms providing digital wallets and payment gateways in India as it looks to become compliant with local regulations.
The Reserve Bank of India (RBI) shut a loophole last month by clarifying that online payments taking place between two Indian 'residents' cannot bypass two-factor authentication. Besides the additional authentication, the central bank also wanted transactions to be carried out in Indian rupees and not dollars.
Uber stores credit card details of passengers and automatically charges the card once the taxi ride is over without two-factor authentication as it uses an international payment gateway. Companies such as Uber now have until October 31 to become compliant.
"They are working on integrating a mobile wallet into their application," said a person with direct knowledge of the discussions. "It will most likely be Paytm. The integration will take some time as it has to go through the Uber process," he said.
Paytm and Uber, when contacted, declined to speak on this matter. Mobile internet services company One97 Communications, founded by 34-year-old Vijay Shekhar Sharma in 2010, launched the Paytm mobile wallet in February. Last year, it received a licence to launch a semi-closed wallet, where users can digitally store cash for mobile and online transactions but cannot withdraw money. Paytm has 12 million mobile wallet users.
Uber, which launched India operations last year, will also most likely partner with payment gateway PayU, owned by South African internet giant Naspers, said two people with direct knowledge of the discussions. PayU is run by Nitin Guptam, 31, a graduate of IIM Ahmedabad and former investment banker at Lehman Brothers. Its customers include Snapdeal, Jabong, Bookmyshow, BigBasket and Groupon India. The company declined to comment.
While these partnerships will help Uber become compliant, it could open up a lot of other issues, said experts. "Consumers do not like keeping significant amounts with wallet service providers. That will be a challenge," said Rahul Chowdhri, partner at Helion Venture Partners. Helion is an investor in taxi aggregator TaxiForSure, which has introduced electronic card swipe machines in the taxis on its network.
While RBI allows users to store up to Rs 50,000 in semi-closed wallets, about 50% of all telecom wallet users keep less than Rs 50 in their accounts, according to industry estimates.
Bad internet connectivity in India is another issue. "The oneclick smooth seamless payment offering of Uber will vanish," said Alok Mehta, director at payment processing firm Atom Technologies. He said the biggest challenge will be the customer getting the one-time PIN required for the two-factor authentication, quickly. "Ecommerce companies, unlike Uber, first take the payment and then deliver the service or goods. A passenger is not going to wait for more than two minutes to authenticate payment and would rather pay in cash and move on."
Goldman Sachs and Google Ventures backed Uber has been facing a backlash from local taxi operators and regulators in many countries, including Germany, Singapore and lately India. In August, Indian radio taxi providers, including Meru Cab, Easy Cabs and Mega Cab, filed a complaint with RBI alleging foreign exchange violations by the American firm. But the company has so far powered ahead with its expansion — launching in four cities in India simultaneously last month. It now operates in 10 cities in the country, making India its largest market outside the US.
The Reserve Bank of India (RBI) shut a loophole last month by clarifying that online payments taking place between two Indian 'residents' cannot bypass two-factor authentication. Besides the additional authentication, the central bank also wanted transactions to be carried out in Indian rupees and not dollars.
Uber stores credit card details of passengers and automatically charges the card once the taxi ride is over without two-factor authentication as it uses an international payment gateway. Companies such as Uber now have until October 31 to become compliant.
"They are working on integrating a mobile wallet into their application," said a person with direct knowledge of the discussions. "It will most likely be Paytm. The integration will take some time as it has to go through the Uber process," he said.
Paytm and Uber, when contacted, declined to speak on this matter. Mobile internet services company One97 Communications, founded by 34-year-old Vijay Shekhar Sharma in 2010, launched the Paytm mobile wallet in February. Last year, it received a licence to launch a semi-closed wallet, where users can digitally store cash for mobile and online transactions but cannot withdraw money. Paytm has 12 million mobile wallet users.
Uber, which launched India operations last year, will also most likely partner with payment gateway PayU, owned by South African internet giant Naspers, said two people with direct knowledge of the discussions. PayU is run by Nitin Guptam, 31, a graduate of IIM Ahmedabad and former investment banker at Lehman Brothers. Its customers include Snapdeal, Jabong, Bookmyshow, BigBasket and Groupon India. The company declined to comment.
While these partnerships will help Uber become compliant, it could open up a lot of other issues, said experts. "Consumers do not like keeping significant amounts with wallet service providers. That will be a challenge," said Rahul Chowdhri, partner at Helion Venture Partners. Helion is an investor in taxi aggregator TaxiForSure, which has introduced electronic card swipe machines in the taxis on its network.
While RBI allows users to store up to Rs 50,000 in semi-closed wallets, about 50% of all telecom wallet users keep less than Rs 50 in their accounts, according to industry estimates.
Bad internet connectivity in India is another issue. "The oneclick smooth seamless payment offering of Uber will vanish," said Alok Mehta, director at payment processing firm Atom Technologies. He said the biggest challenge will be the customer getting the one-time PIN required for the two-factor authentication, quickly. "Ecommerce companies, unlike Uber, first take the payment and then deliver the service or goods. A passenger is not going to wait for more than two minutes to authenticate payment and would rather pay in cash and move on."
Goldman Sachs and Google Ventures backed Uber has been facing a backlash from local taxi operators and regulators in many countries, including Germany, Singapore and lately India. In August, Indian radio taxi providers, including Meru Cab, Easy Cabs and Mega Cab, filed a complaint with RBI alleging foreign exchange violations by the American firm. But the company has so far powered ahead with its expansion — launching in four cities in India simultaneously last month. It now operates in 10 cities in the country, making India its largest market outside the US.
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