California-based online payment solutions platform, PayPal, launched its peer-to-peer digital payments service PayPal.me in August. With some of its largest development centres located in Bengaluru and Chennai, which have more than 2,000 engineers, India has emerged as one of the most important development hubs for PayPal. Business in India (PayPal’s India presence is limited to the cross-border payments space) has also been brisk due to increasing online shopping through overseas transactions.
It recently tied up with the State Bank of India in 2015, and with online hotel aggregator OYO Rooms this March. In an interview with Forbes India, Anupam Pahuja, managing director and general manager in India, talked shop, including their India incubation centre for startups, the challenges for fintech companies, and India’s potential as a market. Excerpts:
Q. What is PayPal’s strategy for India? That seems to be an answer everybody wants. The regulatory environment in India is very progressive. It’s not a question of whether we’re going to come to India, but when. There have been a lot of discussions around what role PayPal will play in helping India’s economy go from cash to less cash. [Approximately 96 percent of all transactions in India are still conducted in cash]. We look forward to playing that role [of pushing for cashless transactions]…the market is huge. That opportunity is not lost on us.
Q. How has PayPal’s India presence evolved over time? We’ve been in the cross-border [transactions across countries] space in India since 2010 or so. Now, one in every three cross-border transactions carried out from India takes place through PayPal. The PayPal Cross-Border 2015 Millennials Report, which was conducted with global market research firm Ipsos Research, evaluates the shopping habits of over 23,000 internet users from 29 countries (including India), and shows that about 79 percent of India’s millennials shop for event tickets online; 82 percent of them shopped overseas in 2015.
Globally, PayPal is growing at around 20 percent per year. I cannot share India numbers, but the growth is very healthy. My business is very focussed around people running small businesses, such as a village potter in Jaipur who exports her wares, or a suit-maker in Mumbai’s Dharavi who receives payments through PayPal.
The biggest differentiator for PayPal is our ability to build trust. If you’re sitting in North America, will you trust something that you’re buying from India? I might not. How do I get my money back? With PayPal building trust, and telling the buyer that if they don’t get the goods, we’ll refund them. We also tell the seller: Ship it to a person in New York; he’s not going to run away. We’re doing it in such a way that we’re not sharing your financial information with anyone, but building that trust to enable online commerce.
Q. How does PayPal.me work? PayPal.me is a new business feature that seeks to reduce the time taken to make or receive payment for a transaction. It is convenient and personalised, and aimed at freelancers and small merchants who are selling products or services across different countries. Merchants can create their own profiles, which includes a personalised URL for their business with their existing PayPal accounts. This URL, and not sensitive information like bank account details and IFSC, is shared with customers making the payment. Customers click on the URL, log into PayPal and complete the payment.
Q. Much has been said about the fintech opportunity in India. What are the challenges for the sector? There’s a lot said about competition heating up. I don’t believe that. I feel the competition in India is not against each other, it is against cash. If you look at the number of transactions that take place in the non-cash format, it’s miniscule, almost 5 percent; the majority 95 percent is in cash. Digital payment companies in India have to get that cash amount minimised.
The other challenge is that the infrastructure in India is actually a boon and a curse at the same time.
It is a curse because mobile networks are atrociously slow, and call-drops happen all the time. The conversion rates from a person browsing [online] to a person buying are quite low because of these infrastructure issues. But the blessing in disguise is that because of the poor [road] infrastructure in India, people don’t want to go shopping to malls anymore and are starting to prefer shopping online.
There’s going to be more disruption in the fintech space in the next five years than there has been in the last 50 years, a lot of which is being precipitated by mobile phone usage. Credit card penetration in India is woefully inadequate. There, a disruption that I believe could occur is that India could leapfrog, just as we did with landline phones. There is an opportunity I feel that people will go directly from cash to mobile wallets.
Q. That could change further as UPI (unified payment interface) comes in. That is the leapfrogging I believe is going to happen.
Q. Globally, what does PayPal need to do in order to take on rivals like Alipay (launched by China’s Alibaba Group in 2004), which claims to be the largest online payment solutions platform? Can you open an Alipay account in India? Can you do it in the United States? You cannot. Where can you use Alipay? In China. Need I say more? I don’t want to talk about somebody else. I know my business model, and it’s very simple. We focus on payments and make it easy for people to move and manage their money. We’re not a hardware company, building phones or setting up a mall. We’re also platform agnostic. It doesn’t matter if you want to use Apple or Android, whether you want to use a mobile or a computer.