MUMBAI: Veteran banker Uday Kotak on Friday raised several concerns over the domination of Google Pe and Phone Pe in the payments business. He said that while banks have been caught napping, policymakers also need to look at the issue from a financial stability point of view.
Speaking at an event organized by India’s International Financial Services Centres Authority (Gift City) and Bloomberg, Kotak said that Indian banks have been behind the curve and have allowed the growth of UPI payments to monopolized by Google Pay and Walmart-owned Phone Pe who have got 85% of the market.
“It is a wake-up call for Indian banking, wake up or you will see a large part of the financial market move out. From a policy and financial stability point of view which policymakers have to look at,” said Kotak. Kotak said that bankers were shortsighted in the last two years. “They said there is no money in payments and let the payment market be taken by these two-three companies.”
Kotak said that bankers need to keep in mind that consumer tech companies have revenue models outside finance. “For example, the e-commerce model. Banks under section 6 of the Banking Regulation Act cannot get into non-financial business. There are serious issues of how we are going to draw the line and simultaneously there is an issue of financial stability,” said Kotak.
The chief of the country’s third-largest private bank also made a reference to the raising of deposits by payment platform Google Pay and to the central bank’s move to ban first loss default guarantees provided by lending platforms. He said that there was a need to establish who was responsible for the deposits and who was bearing the risk on loan assets.
According to Kotak, a competition between a regulated entity and a fintech or consumer tech usually ends up with the tech company being fast and loose on regulation and gaining market share at great speed. “I am not against competition, all I am saying in the name of competitive service we do not have a systemic and stability challenge at the same time,” he said
He urged authorities to take Unified Payment Interface and the Aadhaar Enabled Payment Systems global. He said that there is already a partnership with Singapore but there was a need to take this to other developing markets such as Bangladesh and African countries.Internet Explorer Channel Network