In one of the largest deals in the payments space, the two fintech players PayU and BillDesk will create a formidable force in the fast-growing digital payments. PayU will be acquiring BillDesk in a $4.7 billion deal. The holding company Prosus NV has said BillDesk would complement its Indian payment business under PayU. So what all BillDesk brings to the table for PayU.
Bill payments network
The acquisition of BillDesk gives PayU the largest bill payment ecosystem in India. BillDesk started the bill payments business two decades ago. It has a tie-up with almost all the banks and institutions in India. Today, the BillDesk platform offers over 20,000 billers from utility bill payments, gas bills, insurance premiums to DTH subscriptions. These services are available on all banking platforms from websites to apps. PayU gets a huge network of banks and relationships to offer more services in the future.
Payment aggregator for merchants
BillDesk also has a large payment aggregation business where it has aggregated payments methods (credit, debit cards, UPI, net banking) to enable merchants to accept payments online. There are as many as 170 plus payments methods offered by the BillDesk platform. The company claims it has reached a throughput payments capacity of $100 billion in its payments gateway and bill payment business in the first pandemic year 2020-21. The volumes are expected to grow rapidly as digital payments have increased big time post the pandemic. The public listing of Zomato or Paytm already shows the maturity of many of these models in the market in future. As more and more merchants are coming into the digital payments network, PayU gets to expand the business in a big way.
'SI HUB' solution for recurring mandates
There is a new stricter guideline in place from the Reserve Bank of India (RBI) for auto-debit instructions registered with the third-party service providers for things like OTT payments, DTH, or media subscriptions. Until now, the recurring payments up to Rs 5,000 were getting debited without getting any additional factor of authentication (via SMS or email) from banks. These third-party payments providers now require proper registration to protect the interest of cardholders. The RBI has now shifted the onus of these transactions to banks from the merchants, which are not regulated by the banking regulator. BillDesk has built a 'SI Hub' solution for all the participants in the payments chain. This new system under SI HUB is targeted at managing the mandates on credit or debit cards, as per the RBI guidelines for a seamless customer experience. The RBI deadline for payments providers is September 30. There will be a huge opportunity for players like BillDesk to corner a larger business under its SI HUB solution.
Consortium partner for nationwide retail body
A year ago, the RBI had come up with a new licencing framework for creating multiple retail payment infrastructure entities. This is in line with the National Payment Corporation of India to not only expand the digital payments but also encourage innovations like UPI. Many market participants have applied for a licence. BillDesk is part of a consortium that has credible players like Amazon, ICICI Bank, Axis Bank, Pine Labs, and Visa. PayU gets a foothold in the nationwide retail business-wide via the BillDesk acquisition.
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