Explained: Why NUE marks next inflection point for India’s payments ecosystem?


Written by Pranav Mukul
, Edited by Explained Desk | New Delhi |

March 8, 2021 12:11:05 pm

From Reliance and Tata to Amazon and Paytm, companies with any presence in India’s tech or financial services ecosystem are making a beeline to set up new umbrella entities (NUEs) for payment systems — an idea floated by the Reserve Bank of India to create an alternate mechanism to the existing National Payments Corporation of India (NPCI). The RBI has set a deadline of March 31 for firms to submit their applications for setting up NUEs.

What are NUEs?

As envisaged by the RBI, an NUE will be a non-profit entity that will set-up, manage and operate new payment systems, especially in the retail space such as ATMs, white-label PoS; Aadhaar-based payments and remittance services. In addition to this, they will develop new payment methods, standards and technologies as well as operate clearing and settlement systems.

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Which players are planning to set up NUEs?

Only those entities that are owned and controlled by Indian citizens with at least three years of experience in the payments segment can become promoters of NUEs. Also, foreign investment is allowed in NUEs as long as they comply with the existing guidelines. According to reports, several companies have either tied up banks or major tech players to apply for NUEs. Reliance Industries, along with Facebook and Google — which have invested in Jio Platforms — are planning to apply as a consortium. Further, salt-to-software conglomerate Tata Group has joined hands with HDFC Bank, Kotak Mahindra Bank, MasterCard and Bharti Airtel. Among global players, e-commerce firm Amazon has tied up with Visa, ICICI Bank, Axis Bank and fin-tech startups BillDesk and PineLabs for the NUE licence. Lastly, Softbank portfolio companies Paytm and Ola have also reportedly joined hands to apply for the NUE.

What is the need for NUEs?

Currently, the umbrella entity for providing retail payments system is NPCI, which is a non-profit entity, owned by banks. NPCI operates settlement systems such as UPI, AEPS, RuPay, Fastag, etc. Players in the payments space have indicated the various pitfalls of NPCI being the only entity managing all of retail payments systems in India. RBI’s plan to allow other organisations to set up umbrella entities for payments systems aims to expand the competitive landscape in this area. For the players planning to establish these NUEs, the aim is to get an even bigger share in the digital payments sector.


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