Walmart-owned Flipkart, Mastercard, PayU and National Bank for Agriculture and Rural Development (NABARD) are reportedly set to buy a 30% stake in Tata-promoted Ferbine, which plans to create a New Umbrella Entity (NUE) that will compete with NPCI (National Payment Corporation of India).
The Tata group, it may be recalled, had applied for NUE licence as part of its concerted effort to develop and roll-out a Super App, for a big entry in the online retail space and set up competition with Reliance and Amazon.
And now the Tatas are reportedly being partnered by the other big names in its foray into NUE.
PayU and Flipkart, through its unit FlipPay, is expected to take a stake of around 5% each in Ferbine, while Mastercard and NABARD will hold 10% each, according to a report in the Economic Times.
Ferbine will be a pan-India umbrella entity (PUE) for retail payments.
That is not all. Airtel Digital will have a 10% stake, while HDFC Bank and Kotak Mahindra Bank will each have 9.99% stake in Ferbine. The Tatas will reportedly have 40% hold in Ferbine.
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What is this NUE?
NUEs are being allowed to be set up as retail payment systems that will rival the NPCI.
The RBI (Reserve Bank of India) had announced guidelines to create the NUEs to develop and push technologies for new retail payments systems. The RBI said these new ventures would likely complement the existing platforms run by NPCI rather than compete with or duplicate them.The crucial difference is NUEs can be for-profit while NPCI isn't.
The NUE is expected to develop interoperable payments solutions, that can work with the NPCI’s existing payments platforms, to help grow the digital payments pie in the country by attracting new users.
The NUE guidelines have it that the licence holder will need to create new solutions for ATM networks, point-of-sale (PoS) services, Aadhaar-based payments and remittances.
While the RBI has been scouting for alternatives to NPCI to avoid reliance on UPI alone, the Indian government is not too happy with the apex bank's proposals.
The government feels that payment system should be a core function (like issuing voters ID or Aadhaar) handled by the government and the private sector should be kept at arm's length.
Why are big companies like Reliance, Google, FB in the NUE race?
Aside from this Tatas-led bid, others in the NUE race are Paytm, which has tied up with Ola and IndusInd Bank, a consortium of Amazon-ICICI Bank-Axis Bank and another led by Reliance Industries, which might involve global tech giants Facebook and Google.
The NUE from the Reliance stable will also have Infibeam Avenues’ So Hum Bharat. Infibeam Avenues’ currently runs the payments gateway CCAvenue.
As per rules, no single promoter or promoter group shall have more than 40% investment in the capital of the umbrella entity.
There is a glut of companies vying to get into the scheme of things. And that is because India’s digital payments market is hugely attractive. It reportedly sees over 93 million transactions worth $12 billion daily.
The RBI has extended the deadline for sending applications for NUE licences to March 31.
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