Indian mobile wallet provider Paytm is at the heart of a fierce industry dispute after the country’s government considered revising its recent data storage regulations after being lobbied by US-based digital payment companies.
In April, India’s central bank ordered digital payment companies to store all of their data within India to provide “unfettered supervisory access”. International firms such as American Express, Mastercard and Visa have raised concerns that complying with the legislation could be a hindrance to international fraud detection, as well as costing millions of dollars.
However, the new rules are advantageous to Paytm, as the firm already stores all of its data in India. The company has been outspoken in its support for the legislation, and according to Reuters has quietly attempted to quell opposition to the proposals. In May, the company pushed back against the Payments Council of India (PCI), a lobbying group which attempted to inform the central bank that “most” of its members had objections to the legislation.
At a June meeting chaired by economic affairs secretary S.C. Garg, Paytm argued in favour of storing data locally, claiming it was in the national interest. Garg reportedly told the firm not to cite such concerns in a debate about data storage, according to Reuters.
Paytm’s Sonia Dhawan said: “for the benefit of the country and to uphold the need for data privacy, all the data related to the Indian users must be stored and processed [exclusively in India]. There is absolutely no need for the data of two Indians doing transactions in India to be shared or stored overseas.”
India’s digital payments market is fiercely competitive, with Boston Consulting Group and Google projecting tenfold growth by 2020 to a value of $500 billion. Growth in digital and card payments exploded after November 2016 after the government withdrew several high value banknotes from circulation overnight in a secret initiative aimed at cutting down on currency fraud.
In May this year, credit and debit card transactions in India reached $52 billion across 964 million individual cards, nearly doubling the amount transacted in November 2016. Since this time, the amount transacted from mobile wallets monthly has risen to $2 billion, according to the Reserve Bank of India.
Paytm has capitalised on this growth by forming payment partnerships with local merchants, cementing itself as a serious contender in a space previously dominated by companies such as Mastercard and Visa.
Neil Shah, research director at Counterpoint Research, noted that Paytm’s strategy was aimed at preventing overseas firms from increasing their presence in the market as they would have to focus on data storage.