For Visa and Mastercard, India is a tough market to crack – but it’s also a potential goldmine
India is a big topic of discussion in the payments world. The reasons for that are relatively simple: it’s a massive country, comparable to yesterday’s China in terms of population and development. With the promise that India will continue to develop, the potential for growth it offers is staggering. As the country continues to see a boom in cashless transactions and online payments, big players like Mastercard and Visa are eyeing up a potential pot of gold. But there are still barriers to getting their hands on it.
Visa and Mastercard have both seen their share prices rally year to date
Source: Yahoo Finance
Both companies have started committing major investment into India as the country’s digital payments sector booms. They’re looking to reap the rewards of a major displacement that is being driven by rapid internet adoption amongst the Indian millennials and government activity. In November 2016, the government introduced demonetisation, invalidating large banknotes and eliminating 90% of the currency in circulation. As a result, there’s been a major growth in cashless transactions – but there’s plenty more growth to come, with 90% of payments still being made in cash. As India’s 440 million millennials continue to migrate towards digital, the change could come fast.
Despite this huge potential, Visa and Mastercard face regulatory hurdles in India. In 2018, the Reserve Bank of India (RBI) mandated that subsidiaries of foreign payments firms should store their payments data in India, and said that all “critical” user data to be processed should be done so locally.
As a direct result of that, both companies are looking to expand their presence in the country. Mastercard has committed to building an “Indian services hub” that will deal with most of the data stuff. Porush Singh, the company’s president for South Asia, said: “The government is committed to Digital India and we’re partnering with them by increasing the acceptance of digital payments and by engaging in consumer and merchant education.” Both companies are also working with numerous local fintech start-ups.
With a huge, young, population and a government-driven move away from cash, there’s no doubt that India offers payments companies one of its most relevant markets. So far, Mastercard and Visa look to be doing everything they need to in order to capture it.
Dominion holds Mastercard and Visa in its Global Trends Ecommerce Fund.
If you would you like to receive the Newsfeeds daily, please click here to sign up now!Help us make this Newsfeed better by rating this article. 1 star = Poor and 5 stars = Excellent
- Click here to print this story: Print
The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.