Market Profile for ICT Payments in India

Transcription

1 Market Profile for ICT Payments in India While every effort is made to ensure the accuracy of the information contained herein, New Zealand Trade and Enterprise, its officers, employees and agents accept no liability for any errors or omissions or any opinion expressed, and no responsibility is accepted with respect to the standing of any firms, companies or individuals mentioned, or if the world economic conditions have changed since the research was undertaken. New Zealand Trade and Enterprise reserves the right to reuse any general market information contained in its reports.

2 1.0 THE MARKET & COMPETITIVE ENVIRONMENT 1.1 Market structure and size India is a major supplier of software and Information Technology (IT) goods and services, and the industry is export-focused. Growth remains strong in the main IT services and products sector, and the fastest-growing segment is IT-enabled services and BPO, including call centres, billing and payment services, and technical and customer support. These services are used by many of the world's top multinationals. The size of the e-commerce market and usage of e-payments is still relatively small in India. However, India's telecommunications industry is booming, and the country's mobile-phone market is one of the fastest growing in the world. Spending on IT is forecast to grow substantially, reaching US$42.5 million by IT services is one of the key subsectors of India s services-driven economy. Over time it is likely that the industry will diversify from lower-value business process outsourcing (BPO) and move into higher value added subsectors such as IT consultancy and engineering offshoring. 1 A study released by the Internet and Mobile Association of India (IAMAI) and market research company IMRB International found that there are only 2 million users accessing the Internet through mobile phones and other mobile devices on an active basis, which suggests use of the Internet by mobile at least once a month. The study further states that there are approximately 127 million mobile subscribers (27% of the total subscriber base of 471 million) whose mobile devices are Internet ready. Of these, only 12 million users (9.4%) have accessed the Internet by mobile phones at least once in the last year. This number further reduces down to 2 million or 17% when it comes to active users. 2 The law to regulate India s electronic payments system was passed by both houses of the parliament in late The Payments and Settlements Systems Act gives the Reserve Bank of India (RBI) powers to regulate and supervise electronic transactions carried out in India using banking gateways, which will help reduce the amount of risk in India s payments systems. With nearly 440 million subscribers, mobile phones cover nearly 40% of the country s population. Given this unprecedented coverage, mobile phones are increasingly been seen as agents of socioeconomic development by reaching out to people and places way beyond any other instrument. The Government has identified financial inclusion and penetration of organised banking among the rural Indian population as a key priority area for inclusive growth. Enabling mobile payments and financial transactions through mobile devices is very much a part of this growth. 3 The RBI has issued a set of guidelines for mobile payments transactions as a first step towards recognising mobile phones in the financial sector. 1 Source: India: Telecoms and Technology Report. Economist Intelligence Unit, November Source: Telecom Regulatory Authority of India, September Source: Mr R Chandrashekhar, Secretary, Department of Information Technology, Ministry of Communications and Information Technology, Government of India. February,

3 1.2 Growth rate Impressive growth in mobile subscriber growth (forecast at 49.8% for 2009) 4, along with increased competition and ongoing investments in the expansion of network infrastructure, has contributed to immense growth in the Indian telecommunications sector. The use of e-commerce in India is likely to grow rapidly over the next five years as incomes continue to rise, competition increases and processes become more liberalised. Numbers of electronic transactions are expected to double in India over the next three years due to concerted efforts by the RBI, the country s banks, and merchants to encourage e-payments. The number of electronic transactions is increasing year-over-year. Currently Internet and mobile penetration rates are very low in rural parts of India as compared to the cities. As only one third of the population live in cities, the Government has identified rural access as important to overall growth of the sector, and is increasingly looking for ways to increase awareness of e-commerce and e-payment mechanisms. The liberalisation of Indian economic policy, deregulation of key sectors and moves to further integrate India with the global economy have been key drivers of increased ICT adoption in the country, particularly IT services. One reflection of this trend is that most indigenous players in telecommunications and banking have significantly upgraded their IT services to the extent that these two sectors now account for approximately 35-40% of domestic spending in IT services. The Ministry of Communications and Information Technology has developed a programme, Vision 2010, to guide the telecoms sector. This plan, released in 2006, sets out a number of goals to be achieved by 2010, focusing on "connecting the unconnected parts of the country". These include reaching 500 million mobile-phone subscriptions, coverage of 85% of the country by mobile networks, a mobile penetration rate of 90% and 80 million mobile connections in rural areas. The government's push to increase penetration rates will generate increased demand for telecoms equipment. 1.3 Major players in the market A US firm, Dishnet, pioneered the introduction of broadband in India, which is now also offered by the main telecoms companies. A state-owned firm, Bharat Sanchar Nigam (BSNL), dominates the Internet service market through two subsidiaries, Sancharnet (which provides the firm's dial-up service) and DataOne (which supplies broadband). BSNL is investing heavily in its infrastructure and aims to have 20 million broadband subscribers by Internet providers in India include: Bharat Sanchar Nigam (BSNL) Sancharnet DataOne Dishnet Mahanagar Telephone Nigam (MTNL) 4 Source: India Telecommunications Report Q Business Monitor International, Source: India Telecoms and Technology Report. Economist Intelligence Unit, November February,

4 Leading companies in the Indian mobile industry include: Bharti Airtel Reliance Communications Vodafone Essar The United States and United Kingdom invest heavily in the Indian IT sector, and companies such as Microsoft, Intel, and Cisco have a considerable presence. Indian IT service providers such as Infosys, Wipro, and TCS are looking at suitable partners who can provide products as well as solutions for domestic and international demand. Some key foreign investors in the Indian market include IBM, Idea Cellular, and Nokia Siemens. Government policy encourages rather than creates a level playing field for companies and investors by driving them towards Public Private Partnerships. 1.4 Marketing strategies Foreign firms will start to play an increased role in the Indian telecoms market. In 2005 the Government raised the foreign direct investment (FDI) limit in the sector from 49% to 74%, which has increased foreign presence considerably. Some foreign firms that have announced recent investment plans in India are a Russian conglomerate, AFK Sistema, AT&T and Sony Ericsson. 1.5 Distribution channels Distribution channels in India are more relevant for companies selling large volumes of software or hardware products like telecom handsets or computer hardware or software packages. Apart from Multi National Companies (MNCs), regional players dominate the market more than national players. Most of the software companies in India sell their products directly to the end-users. They also buy value added packages from global firms and offer these as customised services to their customers. After sales service is an important factor in India. 2.0 RECOMMENDED STRATEGIES 2.1 Possible points of differentiation for NZ companies New Zealand companies have certain unique technologies and IP which will help to gain advantage in the Indian ICT Payments market. India is a culturally diverse market, which provides New Zealand companies with the opportunity to adapt to the market more easily than in other parts of the world. This is particularly true when it comes to use of the English language, which is widespread in the Indian business community. The Indian work force is highly literate, which can be capitalised by New Zealand companies either to co-innovate or work as a Global Solution Provider. There are huge opportunities for New Zealand companies to find suitable partners either to sell/distribute/system integrate with local partners, to sell/market domestically or even globally. February,

5 2.2 Tactical recommendations on market entry Joint ventures and partnerships with local companies with a strong presence in India have been a successful business model for many New Zealand companies. New Zealand companies can take advantage of existing financial resources, contacts and distribution and marketing processes set up by the Indian partner, whilst the Indian company can access readily available innovative technology and solutions from New Zealand. Examples of such System Integrator collaborative business models include Tomizone and Reliance Communications, Pingar and HBI Software, and ebus with various service providers in India. Companies focusing on niche market opportunities in India such as e-payments should consider: Visiting relevant trade fairs / exhibitions in India Partnering with local agents or distributors Licensing arrangements through third parties Product Publicity and Promotion in relevant journals and magazines Engaging collaborative business models such as System Integrator. Create innovative offerings that cater to domestic price points and operate at Indian scale of business Consider alternate delivery platforms and models such as SaaS to penetrate into the Indian Market (accessibility and affordability) Pricing is an important factor that influences buyer decisions in India, so firms have to be competitive. Undertake in-market research before entering the market. 2.3 Recommendations on long term strategic issues for exporters to consider New Zealand companies should consider having an ongoing presence in the Indian market in order to gain credibility, reputation and to secure further business. Companies can set up their own operation through a liaison, subsidiary, project or branch office. The New Zealand Trade & Enterprise (NZTE) Beachhead Programme would serve as a highly costeffective resource for New Zealand firms who intend to establish their footprint in India. NZTE New Delhi and Mumbai offices can offer consultancy services, in-market support, assisting with right contacts to Beachhead participants helping them in reducing their entry risks. 2.4 Sustainability issues In light of India s recent rapid economic development, the country faces a number of environmental issues. The conservation and survey of flora, fauna, forests and wildlife, the prevention and control of pollution, afforestation and regeneration of degraded areas, and the protection of the environment have all been highlighted as important issues for the Indian government. India has signed the United Nations Framework Convention on Climate Change and the Kyoto Protocol. The Ministry of Environment and Forests (MEF) holds the responsibility for drafting and implementing policy with regards to environmental protection and sustainable development. The MEF has introduced many projects and schemes to help safeguard to environment. February,

6 Examples that affect the telecommunications industry include the Ecomark scheme, an eco-labelling scheme launched in 1991, which aims to make it easier to identify environmentally friendly products. Any product that is made, used or disposed off in a way that significantly reduces harm to the environment can be considered an environment-friendly product. The Ecomark label is awarded to consumer goods that meet the specified environmental criteria and the quality requirements of Indian standards. For more information on environmental policy in India, see: MARKET RESOURCES AND CONTACTS 3.1 Regulations Duties and Taxes Customs duties in India are administered by the Central Board of Excise & Customs (CBEC) under the Ministry of Finance. Imported goods attract basic customs duty, additional customs duty, special additional duty and an education cess 6. In addition, anti-dumping and safeguard duties are levied on specific products for specified periods. Special excise duties are also levied on certain products listed in various schedules of the Customs Tariff Act. The duties are largely levied on ad-valorem basis, i.e. based on the value of the goods. The duty is levied on the transaction value which is the value of the imported goods between unrelated persons. In addition to ad-valorem duties, for some products, Customs Tariff Act has prescribed specific rates of duties, i.e. the rate of duty is specific in rupee terms and not based on value. For more information on duties and taxes, see the Central Board of Excise and Customs under the Ministry of Finance at: Quotas There are no embargos or preferential treatments offered in this category. The RBI is in the process of releasing an updated version of the payments vision document, which will chart the path beyond An immediate area of concern is authentication of cross-border payments, hampered by KYC / AML considerations, which would lead to significant expansion in the realm of payments. For more details on India's current import policy, consult the Directorate of Foreign Trade (Ministry of Commerce and Industry) at Regulatory Environment The regulatory environment in India has been highly conducive to the growth of the domestic IT industry, as evidenced by its spectacular growth. Intellectual Property Rights (IPR) of computer software is covered under Copyright Law. The Indian Copyright Act 1957 (amended in 1994/95) protects computer programs by imposing strict punishment for infringers under civil and criminal laws and a significant number of measures have been put in place to assert owner rights. The Patents (Amendment) Act 2005 has allowed patentability of embedded software but not application software, 6 Note: The term cess (which is a reduced form of access ) means tax. In India the word cess is often used with a qualifying prefix, most often, as in the case above, as an education cess. Proceeds of the education cess are applied to education within the industry or sector from which the particular cess proceeds are derived. February,

7 and patenting in relation to software remains an area where professional advice should be obtained. (See more on patents below). The Information Technology Act 2000 provides legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communications, commonly referred as e-commerce. Further amendments to this act (passed in December 2008, gazetted in February 2009) require detailed consideration by any firm operating in the e-commerce arena who acts as an intermediary for 3 rd party data, as there can be high levels of potential liability. For more information on legislation specific to telecommunications, consult the Telecom Regulatory Authority of India ( Licensing and Registration New Zealand firms who plan to establish a subsidiary / liaison / branch office in India need to get registration under the Companies Act and other laws as applicable via FEMA (Foreign Exchange FEMA (Foreign Exchange Management Act), Income Tax (CBDT) and other Corporate Tax Laws. There are various service providers / consulting firms who can assist in completion of such registration formalities. For more information on company registration and legislation, consult the Ministry of Corporate Affairs at Patents Companies need to check the cost per patent, number of patents, inventor and management time and time to market, and compare these with factors such as licensing revenues, competitive advantage, and importance of technology and strength of the patent. Among the advantages of patents is licensing revenue, which has added greatly to the capital of leading companies. Attorneys specialising in intellectual property can provide in-market support in establishing necessary registrations and assist in protecting intellectual property. For more information on patents, consult the Controller General of Patents Designs and Trademarks at Industry Standards Industry standards apply mainly to telecommunications equipments, services and accessories. Most buyers / consumers in India usually have their own specifications which are in line with the Indian standards for telecommunications set by the Telecom Engineering Centre (TEC). For Information Technology and software there are no applicable industry standards. 3.2 Government, Business and Trade Government Telecom Regulatory Authority of India Central Board of Excise & Customs Reserve Bank of India Ministry of Information and Communication Technology Department of Telecommunications Telecom Engineering Centre February,

8 National Institute of Smart Governance Unique Identification Authority of India Industry Internet & Mobile Association of India (IAMAI) National Association of Software & Service Companies Centre for Development of Telematics (C-DOT) Trade publications e-payments News Electronic Payments International payments/electronic-payments-intl.aspx Electronics Today Trade Events Nasscom India Leadership Summit Mumbai, India Convergence India New Delhi, India E-Payments India Expo New Delhi, India Smart Cards Expo 2010 Mumbai, India e-india 2010 Hyderabad, India Infocom 2010 Kolkata, India 3.3 NZTE Contact Details This document is one of a series of free information tools for exporters produced by New Zealand and Enterprise (NZTE). NZTE provides a wide range of standard services and sophisticated solutions that assist businesses through every stage of the export process. For information or advice, ring NZTE on , visit or contact your Client Manager. Prepared by: New Zealand Trade and Enterprise, February, February,