India's a magnet for major payments companies around the world, with innovation driven by a mix of government policy, investment and a gigantic addressable market. But there is also opportunity on a smaller scale.
The news that Google is planning a local payments service in India signals sustainable growth for all kinds financial initiatives, according to dLocal's CEO, Sebastian Kanovich. His company is based in San Francisco and recently opened an office in New Delhi.
"It's great news to see the market become more mature," Kanovich said. "We're not competing internally with providers that are in India. The more options that arise there the better."
In India, dLocal is targeting several use cases for payments. It wants to enable global e-commerce companies to accept payments from and make payments to India to serve consumers, contractors and supply chains, with an eye on the freelance economy that is driving local innovation in and out of financial services.
DLocal sells payments technology and processing services to merchants and other organizations inside India, supporting more than 200 local payment methods. Common use cases are a foreign retailer selling into India or a company making payments to freelancers who use local banks.
DLocal's model permits foreign companies to accommodate local payment formats, an area of particular need given the complexity of India's payment ecosystem for payments coming into the country, Kanovich said.
While most payments within the country still happen with cash, the government is aggressively pushing mobile payments through carrots and sticks with some early success. India's digital payment companies are getting a boost from the rise of mobile, and dLocal sees this as a benefit to its own model.
"We don't want to be the next Paytm," Kanovich said. "We want to offer international merchants a chance to operate in India."
Technology companies also sense an opportunity. Samsung and Visa are pouring investment into India to build a digital payments ecosystem, and the Chinese e-commerce giant Alibaba has stepped up its backing of Paytm. Other recognizable Western companies such as Amazon, Uber and e-commerce gateway Stripe have also increased their activity in India.
Google's local service will be called Tez, or "fast," and will support the government-backed Unified Payments Interface, Paytm and MobiKwik.
"The thing that comes to mind about a localized solution is the advantage of using a local language and having more local talent be familiar with the product to easily work on it versus having to bring in an overseas product made in a foreign language and having to spend more time training locals to use as well as work on the product," said Brad Margol, a principal at AZ Payments Group.
It's imperative to take a localized approach in India where, as in China, digital payments are heavily reliant on mobile platforms.
"India still has a large unbanked population and the smartphone market is still in the growth state," said Raymond Pucci, associate director of research services at Mercator Advisory Group, who adds that local regulations must be taken into account. "So Google is wise to customize its pending payment product in India to reflect local payment options and methods to which users are accustomed." Google did not return a request for comment.
This attention has increased usage of noncash options in India and has given foreign companies a burgeoning market to work with, according to Kanovich.
"An e-commerce boom is spreading across India as a new generation of smartphone-armed, digitally savvy shoppers browse the globe for merchants that can deliver purchases to their front door and provide premium content to their devices," Kanovich said.