By Prarthana Mitra
After helping the economy go cashless in the wake of demonetisation, India’s leading digital wallet Paytm received the authorised dealership license earlier this month. Sources told media organisations that the company is planning to make its foray into foreign exchange services and could also venture into cross-border remittance services.
The Reserve Bank of India (RBI) has also sanctioned similar licenses for a handful of other non-traditional players, including Fino Payments Bank, Airtel Payments Bank and JI Payments Bank.
Here’s what happened
Vijay Shekhar Sharma-led Paytm had already disrupted traditional financial sectors with a host of new services like the payments bank, savings, wealth management, consultancy and a few other services that are in the pipeline. One such project which was shelved in 2016 was a tie-up with Alipay (digital payments subsidiary of Chinese retail giant Alibaba Group) to facilitate seamless payment for Uber rides outside India.
Most of its rivals like Fino have already applied for the inward remittance license, so it is likely that Paytm’s expansion will incorporate cross-border payments in the near future as well.
Why you should care
Dealing and exchanging foreign currency in India has been an extremely regulated activity. Financial institutions were required to procure a licence from the central bank. While banks belong to the Authorised Dealer (AD) I category, other non-traditional players are licensed under the AD II category.
With the surge in the use of Paytm among the Indian populace, the RBI believes that authorising money changers to offer foreign exchange services will facilitate smoother transactions and eliminate the problem of exact denominations. Moreover, cashless transactions ensure a hassle-free and speedy currency exchange which is otherwise difficult through traditional methods.
“The opportunity in cross-border payments is huge,” said Prajit Nanu, CEO of Singapore-based InstaRem in an interview with the Economic Times. ”So far, mainly banks have been dealing in cross-border payments, so there has been zero disruption, which gives a big opportunity for fintech players.”
Currently, the cross-border remittance Indian market is estimated to be around $6-7 billion and undoubtedly will increase due to the entry of new age payment banks such as PayTm.
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