The Reserve Bank of India (RBI) has put a hold on the proposed New Umbrella Entity (NUE) framework. The reason for the move is recent data breach incidents in the Fintech industry, ET reported. However, this is a big disappointment for big corporates eyeing to enter the retail payments space, especially those aspiring to develop a super app.
Earlier, Indian and global unions sought a review of the NUE framework. The Unions questioned the very need of setting up NUEs in competition with NPCI, which operates in a non-profit manner. Six consortia, including firms like Amazon, had applied for the NUE license. Recently, the Bank of International Settlements warned that the entry of big tech into financial services will give rise to new challenges.
What is an NUE?
Up until now, the National Payment Corporation of India (NPCI) was the only umbrella organization operating for retail payments and settlements in India. The RBI came up with the idea of an NUE to enable businesses to create for-profit entities, foster competition, and limit risks to the Indian digital payments ecosystem. Hence, in August 2020, it released a Draft Framework for Authorisation of a PAN India New Umbrella Entity (NUE) Retail Payment Systems.
The NUE license would enable a participating agency entity to develop a pan-India control on payments solutions, rivaling the likes of the NPCI. The RBI designed the framework to aid organizations in the development, management, and operation of innovative payment systems in the retail sector. ATMs, White Label PoS, Aadhaar-based payments and remittance services, newer payment methods, standards, and technologies, as well as clearing and settlement systems for participating banks and non-banks, all fall under this category.
Big Players entering the Arena
TATA Group: Tata Group will back the proposed NUE through its subsidiary Ferbine Pvt Ltd and is expected to hold the majority stake in the venture. Airtel Digital will buy a 10% stake in Ferbine while HDFC Bank and Kotak Mahindra reportedly have a 9.9% stake each in the venture. Mastercard and Nasper-backed PayU are also part of the consortium.
Amazon: Ecommerce giant Amazon, along with ICICI Bank, Axis Bank, and Visa has reportedly sent a proposal too. According to reports, the consortium also features Indian merchant payments unicorn Pine Labs and Indian online payment gateway BillDesk.
Reliance: Reliance has reportedly signed up with Google and Facebook to set up an NUE, which will be promoted by RIL and Infibeam Avenues’ So Hum Bharat. Infibeam Avenues’ currently runs the payments gateway CCAvenue.