The US-based digital payments player’s domestic operations include its payments gateway and aggregator services for online merchants and brands. The move away is expected to streamline operations in the country’s highly competitive digital payments market.
The Palo Alto, California-based company will soon initiate a restructuring exercise and, from 6 February, will start notifying Indian merchant partners who avail of its gateway services about plans to terminate contracts by 1 April, the spokesperson told ET. “In the early days of the pandemic when the government’s measures to curb the virus was gaining momentum, we started planning on how we can protect our business and optimise our growth here,” the spokesperson said.
“India is a very crucial market for PayPal, and after a thorough analysis, we decided that we are best placed here to focus on enabling cross-border trades and exports for Indian businesses aiming to go global.”
PayPal’s India operations are largely divided into two buckets.
One focused on enabling payments for domestic brands such as Myntra, Swiggy, BookMyShow through the gateway services, and the second unit that focused on cross-border remittance services for exporters and small businesses.
“It made sense to us to do one thing right, which is our cross-border trade business, rather than to focus on multiple businesses…we can’t do everything here,” the person added. “From 1 April, we won’t be offering Payment Gateway and Aggregator services here. We are ensuring that this process is smooth for our customers and employees here.”
The company’s three tech centres — in Bengaluru, Chennai and Hyderabad — which are among the largest outside the United States, along with its business development teams, will now focus entirely on the cross border trade and global business, the person added.
While the domestic payment service will have run its course by the end of the current fiscal year, the company will keep select operations live for any dispute resolution and refund related reconciliations, the person said.
At $277 billion, Nasdaq-listed PayPal on Thursday reported its strongest-ever quarterly growth in payment volume in the fourth quarter, as the Covid-19 pandemic fuelled online transactions across the globe.
In India, PayPal’s inward remittances volume for 2020 grew by 22% to $1.4 billion, led by a massive demand for edtech, wellness, fashion and freelance services globally for Indian business, according to people in the know.
PayPal will face stiff competition from traditional remittance players such as Western Union and MoneyGram on its cross-border business. India’s domestic payments market, meanwhile, is among the most fiercely competitive in the world with global giants such as Google, Facebook, Walmart and Amazon facing off for a share of the retail payments pie on India’s fast growing Unified Payments Interface (UPI) channel.
Separately, recent regulatory and policy moves by the finance ministry and the central bank, which include waiver of transaction fees for merchants using UPI and increased compliance requirements for gateway and aggregator services, have made it harder to make profits for businesses running core payments operations.
“India’s UPI is among the most innovative payment technologies in the world. We believe there is a lot of value in continuing to be a major player enabling remittance business as the country is at the forefront of payments-led innovation,” the PayPal spokesperson said.
“We have high regard for what the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) have done.”