Mobile payments firms in India are now scrambling to make money

Vijay Shekhar Sharma, founder and chief executive of India’s most valuable startup, Paytm, posed an existential question in a recent press conference.
“What do you think of the commercial model for digital mobile payments. How do we make money?” Sharma asked Nandan Nilekani, one of the key architects of the Universal Payments Infrastructure that created a digital payments revolution in the country.
It’s the multi-billion-dollar question that scores of local startups and international giants have been scrambling to answer as many of them aggressively shift their focus to serving merchants and building lending products and other financial services .
New Delhi’s abrupt move to invalidate much of the paper bills in the cash-dominated nation in late 2016 sent hundreds of millions of people to cash machines for months to follow.
For a handful of startups such as Paytm and MobiKwik, this cash crunch meant netting tens of millions of new users in a span of a few months.
India then moved to work with a coalition of banks to develop the payments infrastructure that, unlike Paytm and MobiKwik’s earlier system, did not act as an intermediary “mobile wallet” to serve as an intermediary between users and their banks, but facilitated direct transaction between two users’ bank accounts.
Silicon Valley companies quickly took notice. For years, Google and the likes have attempted to change the purchasing behavior of people in many Asian and African markets, where they have amassed hundreds of millions of users.
In Pakistan, for instance, most people still run errands to neighborhood stores when they want to top up credit to make phone calls and access the internet.
With China keeping its doors largely closed for foreign firms, India, where many American giants have already poured billions of dollars to find their next billion users, it was a no-brainer call.
“Unlike China, we have given equal opportunities to both small and large domestic and foreign companies,” said Dilip Asbe, chief executive of NPCI, the payments body behind UPI.
And thus began the race to participate in the grand Indian experiment. Investors have followed suit as well. Indian fintech startups raised $2.74 billion last year, compared to 3.66 billion that their counterparts in China secured, according to research firm CBInsights.
And that bet in a market with more than half a billion internet users has already started to pay off.
“If you look at UPI as a platform, we have never seen growth of this kind before,” Nikhil Kumar, who volunteered at a nonprofit organization to help develop the payments infrastructure, said in an interview.
In October, just three years after its inception, UPI had amassed 100 million users and processed over a billion transactions. It has sustained its growth since, clocking 1.25 billion transactions in March — despite one of the nation’s largest banks going through a meltdown last month.
“It all comes down to the problem it is solving. If you look at the western markets, digital payments have largely been focused on a person sending money to a merchant. UPI does that, but it also enables peer-to-peer payments and across a wide-range of apps. It’s interoperable,” said Kumar, who is now working at a startup called Setu to develop APIs to help small businesses easily accept digital payments.
Vice-president of Google’s Next Billion Users Caesar Sengupta speaks during the launch of the Google “Tez” mobile app for digital payments in New Delhi on September 18, 2017 (Photo: Getty Images via AFP PHOTO / SAJJAD HUSSAIN)
The Google Pay app has amassed over 67 million monthly active users. And the company has found the UPI pipeline so fascinating that it has recommended similar infrastructure to be built in the U.S.
In August, the Federal Reserve proposed to develop a new inter-bank 24×7 real-time gross settlement service that would support faster payments in the country. In November, Google recommended (PDF) that the U.S. Federal Reserve implement a real-time payments platform such as UPI.
“After just three years, the annual run rate of transactions flowing through UPI is about 19% of India’s Gross Domestic Product, including 800 million monthly transactions valued at approximately $19 billion,” wrote Mark Isakowitz, Google’s vice president of Government Affairs and Public Policy.
Paytm itself has amassed more than 150 million users who use it every year to make transactions. Overall, the platform has 300 million mobile wallet accounts and 55 million bank accounts, said Sharma.
Search for a business model
But despite on-boarding more than a hundred million users on their platform, payment firms are struggling to cut their losses — let alone turn a profit.
At an event in Bangalore late last year, Sajith Sivanandan, managing director and business head of Google Pay and Next Billion User Initiatives, said current local rules have forced Google Pay to operate in India without a clear business model.
Mobile payment firms never levied any fee to users as a strategy to expand their reach in the country. A recent directive from the government has now put an end to the cut they were receiving to facilitate UPI transactions between users and merchants.
Google’s Sivanandan urged the local payment bodies to “find ways for payment players to make money” to ensure every stakeholder had incentives to operate.
Paytm, which has raised more than $3 billion to date, reported a loss of $549 million in the financial year ending in March 2019.
The firm, backed by SoftBank and Alibaba, has expanded to several new businesses in recent years, including Paytm Mall, an e-commerce venture, social commerce, financial services arm Paytm Money and a movies and ticketing category.
This year, Paytm has expanded to serve merchants, launching new gadgets such as a stand that displays QR check-out codes that comes with a calculator and a battery pack, a portable speaker that provides voice confirmations of transactions and a point-of-sale machine with built-in scanner and printer.
In an interview with TechCrunch, Sharma said these devices are already garnering impressive demand from merchants. The company is offering these gadgets to them as part of a subscription service that helps it establish a steady flow of revenue.
The firm’s Money arm, which offers lending, insurance and investing services, has amassed over 3 million users. The head of Paytm Money, Pravin Jadhav, resigned from the company this week, a person familiar with the matter said. A Paytm spokeswoman declined to comment. (Indian news outlet Entrackr first reported the development.)
Flipkart’s PhonePe, another major player in India’s payments market, today serves more than 175 million users, and over 8 million merchants. Its app serves as a platform for other businesses to reach users, explained Rahul Chari, co-founder and CTO of the firm, in an interview with TechCrunch. The company is currently not taking a cut for the real estate on its app, he added.
But these startups’ expansion into new categories means that they now have to face off even more rivals, and spend more money to gain a foothold. In the social commerce category, for instance, Paytm is competing with Naspers-backed Meesho and a handful of new entrants; and heavily-backed OkCredit and KhataBook today lead the bookkeeping market.
BharatPe, which raised $75 million two months ago, is digitizing mom and pop stores and granting them working capital. And PineLabs, which has already become a unicorn, and MSwipe have flooded the market with their point-of-sale machines.
A vendor holds an Mswipe terminal, operated by M-Swipe Technologies Pvt Ltd., in an arranged photograph at a roadside stall in Bengaluru, India, on Saturday, Feb. 4, 2017. (Photographer: Dhiraj Singh/Bloomberg via Getty Images)
“They have no choice. Payment is the gateway to businesses such as e-commerce and lending that you can monetize. In Paytm’s case, their earlier bet was Paytm Mall,” said Jayanth Kolla, founder and chief analyst at research firm Convergence Catalyst.
But Paytm Mall has struggled to compete with giants Amazon India and Walmart’s Flipkart. Last year, Mall pivoted to offline-to-online and online-to-offline models, wherein orders placed by customers are serviced from local stores. The company also secured about $160 million from eBay last year.
An executive who previously worked at Paytm Mall said the venture has struggled to grow because its goal-post has constantly shifted over the years. It has recently started to focus on selling fastags, a system that allows vehicle owners to swiftly pay toll fees. At least two more executives at the firm are on their way out, a person familiar with the matter said.
Kolla said the current dynamics of India’s mobile payments market, where more than 100 firms are chasing the same set of audience, is reminiscent of the telecom market in the country from more than a decade ago.
“When there were just four to five players in the telecom market, the prospect of them becoming profitable was much higher. They were scaling like crazy. They grew with the lowest ARPU in the world (at about $2) and were still profitable.
“But the moment that number grew to more than a dozen overnight, and the new players started offering more affordable plans to subscribers, that’s when profitability started to become elusive,” he said.
To top that off, the arrival of Reliance Jio, a telecom operator run by India’s richest man, in 2016 in the country with the cheapest tariff plans in the world, upended the market once again, forcing several players to leave the market, or declare bankruptcies, or consolidate.
India’s mobile payments market is now heading to a similar path, said Kolla.
If there were not enough players fighting for a slice of India’s mobile payments market that Credit Suisse estimate could reach $1 trillion by 2023, WhatsApp, the most popular app in the country with more that 400 million users, is set to roll out its mobile payments service in the country in a couple of months.
At the aforementioned press conference, Nilekani advised Sharma and other players to focus on financial services such as lending.
Unfortunately, the coronavirus outbreak that promoted New Delhi to order a three-week lockdown last month is likely going to impact the ability of millions of people to use such services.
“India has more than 100 million microfinance accounts, serviced in cash every week by gig-economy workers, who hawk vegetables on street corners or embroider saris sold in malls, among other things. Three out of four workers make a living by working casually for others or at their family firms and farms. Prolonged shutdowns will impair their ability to repay loans of 2.1 trillion rupees ($28.5 billion), putting the world’s largest microfinance industry at risk,” wrote Bloomberg columnist Andy Mukherjee.

Mobile payments firms in India are now scrambling to make money

FCC mandates strict caller ID authentication to beat back robocalls

The FCC unanimously passed a new set of rules today that will require wireless carriers to implement a tech framework to combat robocalls. Called STIR/SHAKEN, and dithered over for years by the carriers, the protocol will be required to be put in place by summer of 2021.
Robocalls have grown from vexation to serious problem as predictable “claim your free vacation” scams gave way to “here’s how to claim your stimulus check” or “apply for coronavirus testing here” scams.

Be on guard for coronavirus robocalls, warns FCC

A big part of the problem is that the mobile networks allow for phone numbers to be spoofed or imitated, and it’s never clear to the call recipient that the number they see may be different from the actual originating number. Tracking and preventing fraudulent use of this feature has been on the carriers’ roadmap for a long time, and some have gotten around to it in some ways, for some customers.
STIR/SHAKEN, which stands for Secure Telephony Identity Revisited / Secure Handling of Asserted information using toKENs, is a way to securely track calls and callers to prevent fraud and warn consumers of potential scams. Carriers and the FCC have been talking about it since 2017, and in 2018 the FCC said it needed to be implemented in 2019. When that hadn’t happened, the FCC gave carriers a nudge, and at the end of the year Congress passed the TRACED Act to spur the regulator into carrying out its threat of mandating use of the system.
Rules to that effect were proposed earlier this month, and at the FCC’s open meeting today (conducted remotely), the measure passed unanimously. Commissioner Jessica Rosenworcel, who has been vocal about the lack of concrete action on this issue, gladly approved the rules but vented her frustration in a statement:
It is good news that today the Federal Communications Commission adopts rules to reduce robocalls through call authentication. I only wish we had done so sooner, like three years ago when the FCC first proposed the use of STIR/SHAKEN technology.
Commissioner Brendan Starks called the rules a “good first step,” but pointed out that the carriers need to apply call authentication technology not just on the IP-based networks but all over, and also to work with each other (as some already are) to ensure that these protections remain in place across networks, not just within them.
Chairman Ajit Pai concurred, pointing out there was much work to do:
It’s clear that FCC action is needed to spur across-the-board deployment of this important technology…Widespread implementation of STIR/SHAKEN will reduce the effectiveness of illegal spoofing, allow law enforcement to identify bad actors more easily, and help phone companies identify—and even block—calls with illegal spoofed caller ID information before those calls reach their subscribers. Most importantly, it will give consumers more peace of mind when they answer the phone.
There’s no silver bullet for the problem of spoofed robocalls. So we will continue our aggressive, multi-pronged approach to combating it.
Consumers won’t notice any immediate changes — the deadline is next year, after all — but it’s likely that in the coming months you will receive more information from your carrier about the technology and what, if anything, you need to do to enable it.

FCC mandates strict caller ID authentication to beat back robocalls

Facebook Messenger preps Auto Status location type sharing

Facebook Messenger could soon automatically tell your closest friends you’re at the gym, driving or in Tokyo. Messenger has been spotted prototyping a ported version of the Instagram close friends-only Threads app’s Auto Status option that launched in October.
The unreleased Messenger feature would use your location, accelerometer and battery life to determine what you’re up to and share it with a specific subset of your friends. But instead of sharing your exact coordinates, it overlays an emoji on your Messenger profile pic to indicate that you’re at the movies, biking, at the airport or charging your phone.

It’s unclear if or when Messenger might launch Auto Status. But if released, the feature could become Facebook’s version of the AOL Away Message, allowing people to stay in closer touch without the creepiness of exact location sharing. It might also help people coordinate online or offline meetups by revealing what friends are up to. Auto Status creates an ice breaker, so if it says a close friend is “at a cafe,” or “chilling,” you could ask to hang out.
Back in 2016, I wrote about how exact location sharing had failed to become mainstream because knowing where someone is doesn’t tell you their intention. What matters is whether they’re free to interact with you, which none of the social networks offered.

The quest to cure loneliness

A few products, like Down To Lunch and Free, came and went in the meantime. Snapchat’s Snap Map and its acquisition of Zenly both doubled down on precise location sharing, yet still we’re often stuck home wondering if anyone we care about is similarly bored and might want to hang out.
Facebook has been experimenting in this space since at least early 2018, when its manual Emoji Status was spotted. That allowed you to append an emoji of your choosing to your Messenger profile pic. Then in October, Facebook introduced Auto Status, but only in the Instagram side-app Threads.

Some users were initially creeped out by the idea of Facebook relaying battery status. But Instagram director of Product Management Robby Stein explained to me that because you might not respond to a message if your phone goes dead or is left on the charger, it’s useful info to relay to friends who might be wondering what you’re doing.
Then earlier this month, reverse engineering master and constant TechCrunch tipster Jane Manchun Wong revealed a new, unreleased version of Emoji Status hidden in Messenger’s Android code. Then today, Wong showed off how she similarly spotted Facebook trying to port Auto Status to Messenger. That would bring the feature to more than one billion monthly users compared to the relatively small base for Threads.
With Auto Status, you can “Let specific friends see what you’re up to as you go about your day. Share location info, weather, and more, even when you’re not in the app.” Auto Status is only visible to a special list of friends you can change at any time, similar to Instagram Close Friends. And the feature shares “no addresses or place names. Just types of locations, like “at a cafe.” Movement (driving, biking, walking), venue (at the movies, airport), cities (in Tokyo) and battery status (low battery, charging) are some of categories of what Auto Status shares.
A Facebook Messenger communications representative confirmed to TechCrunch that the Auto Status feature was being prototyped by Messenger, noting that “We’re always exploring new features to improve your Messenger experience. This feature is still in early development and not externally testing.” The company also tweeted the statement.

One of the biggest unsolved problems in social networking and messaging remains knowing whether friends are free to chat or hang out without having to ask them directly. Reaching out at the wrong time only to be ignored or rejected can feel awkward or intimidating, and can discourage connection later. But if you have a vague idea of what a close friend is up to, you can more deftly plan when to message them, and be more likely to get to spend time together in person or just online.
That could be a cure to the loneliness that endless feed scrolling by ourselves can leave us feeling.

Instagram launches Threads, a Close Friends chat app with auto-status

Facebook Messenger preps Auto Status location type sharing

Declining ad rates may signal a reset for startup SEM strategies

With limited prospects for growth, one of the iron laws of economic downturns is that advertising is among the first budgets to be cut.
Advertising revenues have already cratered at many alt-weekly newspapers, which heavily rely on local events and restaurants that have been shuttered in the wake of the COVID-19 outbreak. BuzzFeed even went so far (as they do) to label it a “media extinction event.”
Clearly it’s bad times, but I wanted to get a lot more granular around the data for ad rates, particularly around top startups. So I compiled a list of a little more than 100 unicorns across a variety of sectors and explored how the prices of their search engine keywords have changed with the global pandemic that is sparking a global recession.
The results aren’t surprising — there has been a collapse in prices for almost all ads (with some very interesting exceptions we will get to in a bit). But the variations across startups in their online ad performance says a lot about industries like food delivery and enterprise software, and also the long-term revenue performance of Google, Facebook and other digital advertising networks.
A quick overview of the data
It’s common for startups to buy their own keywords on search engines like Google and the App Store. Owning that top rank guarantees that their own company’s page is the first result a user sees and prevents competitors from buying their name, potentially intercepting customers.

Declining ad rates may signal a reset for startup SEM strategies

Carriers introduce plans to keep consumers connected during COVID-19 pandemic

Earlier this month, the FCC issued a new measure aimed at easing some of the burdens on consumers as COVID-19 continues to have an increasingly profound impact on nearly every aspect of life.
Most or all major internet and wireless providers in the U.S. signed up for the pledge, agreeing to take actions like waiving late fees and not terminating service. Now specific plans are starting to emerge from carriers, aimed at helping cash-strapped consumers until this pandemic blows over.
T-Mobile this morning announced the launch of a $15/month Metro plan — at half the cost of its current lowest-price plan. The pricing will be in place for the next 60 days, including unlimited talk and 2GB of data. The company is also tossing in a free eight-inch tablet (with rebate, plus fine print) and will be adjusting other data plans for the next two months.
At the same time, Verizon (TC’s parent company) announced that it will be adding 15GB of 4G data to current consumer and small business plans, in an effort to help customers use their handsets as mobile hotspots as needed. The company will also be taking $20 off select FiOS plans and waving router rental fees for 60 days.
Like the other carriers, AT&T noted in a message to TechCrunch that it will not terminate service over inability to pay. It will also be waiving late fees, along with domestic overcharges for data, voice and text, retroactive to March 13.
Sprint, meanwhile, will provide for 60 days unlimited data to customers with metered plans, starting March 18, along with 20GB of free mobile hotspot data.

Carriers introduce plans to keep consumers connected during COVID-19 pandemic