Uber, the ubiquitous black-car company that popularized the use of mobile apps to book rides, will switch to a two-tiered payment system to continue operations in India.
The company entered a partnership with Indian payment platform Paytm, which claims over 200 million users in the country. The relationship was necessary for Uber to continue operations in India, a country historically cool to direct investment and operations by foreign-based companies due to the competition it creates for local businesses. Uber had been under pressure from India's central bank, the Reserve Bank of India (RBI), to introduce two-step authentication for payments.
To meet those regulatory standards Uber will force domestic payments in India through a Paytm virtual wallet. Customers with international credit cards will still be able to pay directly from their card, rather than opening a Paytm account. Indian Uber customers will be able to continue direct payments until the beginning of December.
The regulatory crackdown, ostensibly about anti-fraud protection, may be motivated as much by India's protectionist economic culture, a holdover of Jawaharlal Nehru's socialist policies, that for decades has made foreign direct investment in the country difficult. Smoothing foreign direct investment has been a topic of negotiation between the U.S. and India for years and further liberalizing the country's economy became a campaign platform of its newly elected prime minister, Narendra Modi.
The RBI's treatment of Uber fueled further debate over whether India's economic policies are too constrictive on international and startup companies, according to a report by the Business Standard, an Indian business publication. The central bank's governor, Raghuram Rajan, publicly bristled at the suggestion that his bank's regulations stifled companies, saying, "If there is a rule on the book, we do not allow it to be violated simply because an innovation is cool."