The Reserve Bank of India (RBI) is monitoring the recently announced tie-up between Google Pay and Equitas Small Finance Bank. The central bank is considering the implications and subsequent effects of large tech companies entering the financial technologies sector in India, reported the Business Standard.
The tie up between the two companies was announced last week and allowed users of Google Pay to open up fixed deposits with the bank through the payment portal itself.
“In an industry-first, consumers can through the Google Pay app book high-interest rate FDs fully digitally - without needing to open savings account with Equitas Bank on its own Spot integrated with the Google Pay platform. So, Google Pay users can book FDs from the comfort of their homes ensuring an easy, safe and hassle-free experience,” a statement from the company read.
Even though the deal is prima facie well within established rules and regulations, the sudden entry of Google into the deposits market with the tie-up has rankled the RBI, sources told the Business Standard.
RBI has been wary of allowing leeway to large tech companies like Google, Facebook, Amazon, Apple and Microsoft in the financial sector. In its bi-annual Financial Stability Report, the RBI had already highlighted the risk to India's financial stability posed by the greater inclusion of such tech firms in the financial services sector.
A few of the possibilities include Google Pay using its position as a leading UPI provider to browbeat other banks and render the apps of banks themselves redundant. Other large companies may also look to enter the market seeing Google's example, something that the RBI is not keen to see.
For their part, Equitas, its technology provider Setu, and Google have all highlighted the fact that the tie-up only involves using Google Pay as a distribution channel. Following the rules, Google receives no commision for new FDs, neither does it have any say in the running of the FDs, and the KYC is fully taken care of by the bank as well. In essence, the Google Pay platform is just working as a platform for Equitas to offer its services and onboard new users.
“As Google Pay, our role is firmly circumscribed to providing these merchants a surface where Google Pay users can discover and gain from these offerings -- be it credit products, insurance or any other,” wrote Sajith Sivanandan, business head, payments and new business unit of Google APAC in a blog post.
While the RBI keeps a close watch on the developments, further insights into the central bank’s opinion towards partnerships of large tech firms for fintech services would possibly be revealed in the upcoming report from the central bank on digital lending.