Why is India integral to Amazon’s fintech foray?
Amazon wants to make fintech a key part of its burgeoning digital services ecosystem in India, which is expected to become one of the e-commerce giant’s largest markets over the next few years. With 100 million users in India, Amazon already sells lots of goods online to Indians, including content streaming services. A digital banking ecosystem could help it sell more, including more memberships in its Prime loyalty program and of course, various financial services themselves.
Amazon first forayed into India fintech in 2016 with its Amazon Pay Wallet. The e-wallet has enjoyed modest success. Bernstein Research estimates it has a 16% share of India’s payments market, No. 3 after Walmart-backed PhonePe (about 20%) and Google Pay (about 38%). The Times of India found that Amazon Pay processed 60 million transactions on India’s dominant state-backed UPI network in May, behind Paytm’s 125 million, PhonePe’s 445 million and Google Pay’s 541 million.
At the same time, Amazon Pay has signed up 4 million merchants and launched its Doorstep feature in 2018, allowing customers to use a cash pickup service to top up their wallets without requiring a bank account.
According to a June 2020 Assocham-PwC study, India’s digital payments market is expected to reach $135.2 billion by 2023, an increase of more than 200% from USS$64.8 billion in 2019. Over the same time period, India’s share of global digital payments transaction value is predicted to increase to 2.02% from 1.56%.
To be sure, payments are important to bring users into Amazon’s nascent Indian digibanking ecosystem. But they are just the first step. After all, unto themselves, payments are thin margin and a dime a dozen in a market with more than 40 different e-wallets.
Thus far, Amazon has added a hodgepodge of other digibanking services, including a credit card, gold investment products and auto insurance. It has invested in online digital lender Capital Float, digital insurer Acko, gift card platform Qwikcilver, and BankBazaar, a financial products marketplace. None of these moves yet looks like a game changer.
“It is likely that the next step for Amazon would be to distribute exchange-traded funds and mutual funds,” Niren Shah, India head of Silicon Valley firm Norwest Venture Partners, told Reuters earlier this month.
