Tata Group, HDFC Bank, Kotak Mahindra Bank team up for payment gateway licence: report

The Tata Group is reported to have taken over State Bank of India and Bank of Baroda’s bid for a Reserve Bank of India (RBI) licence to set up a New Umbrella Entity (NUE) for retail payments in the country, the Economic Times reported. 

The move to apply for a NUE licence is part of a concerted effort by the group to develop and roll-out its Super App, for a big entry in the online retail space and set up competition with Reliance and Amazon.
RBI is reported to have rejected the bids of state-run SBI and BoB for setting up the NUE, which has since been lapped up by Tata Group along with HDFC Bank and Kotak Mahindra Bank.  
HDFC Bank and Kotak Mahindra Bank, each have a 9.9 per cent stake in the entity, while Airtel Digital will buy a 10 per cent stake, the report said, adding that Mastercard and PayU are also part of the Tata-Kotak-HDFC Bank consortium.
The Tata-led NUE will also be a rival to the National Payments Corporation of India (NPCI), the report said, adding that the Tata Group has set up an entity called Ferbine Pvt Ltd for setting up the NUE. 
For Mastercard, which is a dominant card network company worldwide, a stake in the new umbrella entity will help compete better against NPCI-backed payment systems in the country. in the country, PayU is among the leading payment gateway provider. HDFC Bank and Kotak Mahindra Bank are also both leading private banks with a strong digital footprint. 
According to the RBI’s NUE guidelines, the new licence holder to operate and develop retail payments platforms can be profit-making unlike the NPCI, which is currently a not-for-profit entity. The NUE is expected to develop interoperable payments solutions, that can work with the NPCI’s existing payments platforms, to help grow the digital payments pie in the country by attacking new use-cases and target markets. RBI has invited applications till the end of February 2021, an expert committee will evaluate the applications after which the Board for Regulation and Supervision of Payment and Settlement Systems will take a final call on granting licences, within a six-month period. The NUE guidelines state that the licence holder will need to create new solutions for ATM networks, point-of-sale (PoS) services, Aadhaar-based payments and remittances.
Other entities inthe NUE race include Paytm, which has tied up with Ola and IndusInd Bank, a consortium of Amazon-ICICI Bank-Axis Bank and another led by Reliance Industries and So Hum Bharat Digital.  
RBI has extended the deadline for submitting applications for an NUE licence till 31 March, from 26 February. “Requests have been received from various stakeholders including Indian Banks’ Association for extending the timeline, keeping in view the COVID-19 related disruptions and inconveniences. It has been accordingly decided to extend the timeline,” the RBI said.