You likely saw the announcement recently in the Wall Street Journal that Google would be getting into the business of offering checking accounts in the U.S. with help from its partners Citigroup and Stanford Federal Credit Union. The partnership with financial institutions is needed since Google does not have a banking charter of its own that would allow it to get into the business of offering checking accounts directly.
A different story is playing out in the rapidly growing financial services industry in India where the barriers to receiving a banking license have been lowered. This excerpt from PaymentsSource explains how U.S. retailer Walmart and Indian super-app Paytm are moving in to banking services:
Paytm and Walmart are each offering credit in India to obtain a competitive advantage in an environment that’s typically more welcoming than that of China.
The next step beyond payments is credit and direct lending. Paytm hopes to take advantage of a recent regulatory change in India that eases the requirements to obtain a banking license, a move the government hopes will bring more small businesses into the financial system.
Indian media widely reports Paytm will seek a small banking license, giving it an entry into the micro lending, consumer, agriculture and small business banking markets (Paytm’s parent company, One97 Communications, did not return a request for comment). It’s a play similar to Square, which has attempted to get a banking license in the U.S. to make small business loans
India’s regulatory environment more closely resembles Singapore, which has also opened its banking licensing to a broader set of companies to boost the connection between payment technology and more traditional banking. China’s Ant Financial, which operates Alipay, is reportedly seeking a Singapore license; and is affiliated with Alibaba, an investor in Paytm. Paytm has used Alibaba’s model in parts of its own business, such as mixing online and offline retail experiences.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
