.svg)
India’s largest food delivery and restaurant comparison site has ditched two payments licences after finding that the overall efficiency of the sector made its own foray "not commercially viable".
Earlier this month, Zomato informed its shareholders that it plans to surrender its online payment aggregator licence and its licence as an issuer of prepaid payment instruments (PPIs).
The move follows almost three years of regulatory groundwork put in by Zomato’s subsidiary, Zomato Payments Private Limited (ZPPL). ZPPL was formed in 2021 to comply with Reserve Bank of India (RBI) requirements and to submit the applications that were necessary for Zomato’s payments plans.
In January 2024, the subsidiary received RBI approval to operate as an online payment aggregator and PPI issuer, but as of this month’s announcement, neither of the licences will be put into action.
“Thanks to RBI’s efforts, the payments landscape in India has evolved meaningfully over the past couple of years since the time we applied for these licences,” Zomato said in a statement. “This has over time, therefore, resulted in a seamless payment experience for customers.”
Zomato said it was “conscious” of the rapid evolution of India’s payments market, but the real impact of these changes did not become apparent until the subsidiary moved closer towards its commercial launch.
“At Zomato, we do not see ourselves having a significant competitive advantage against the incumbents in the payments space, and hence we don’t foresee a business in payments as commercially viable for us, at this stage,” the company said.
A payment aggregator is a service provider that allows businesses to process card payments and mobile transactions without setting up a merchant account with a bank or card network.
Instead, the aggregator manages one merchant account and combines all of its clients under this umbrella account.
Ram Rastogi, chair and director of India’s Fintech Association for Consumer Empowerment (FACE), said that Zomato’s decision can be seen primarily as a strategic refocus on its core competencies: food delivery and related services.
“The company, which has been at the forefront of revolutionising the food delivery market in India, seems intent on consolidating its efforts and resources towards enhancing its primary service offerings,” said Rastogi.
“By relinquishing its payment licences, Zomato can redirect its focus and investments towards improving delivery logistics, customer experience and expanding its market presence.”
However, Rastogi also noted that costly and time-consuming regulatory procedures are likely to have been a major factor in Zomato’s decision and its acknowledgement that rival payments firms are already dominant.
“The financial sector in India is heavily regulated, with the RBI setting stringent norms for payment aggregators and wallet providers to ensure security, transparency and customer protection,” he said.
“Zomato’s exit could be partly driven by the need to comply with these rigorous regulatory requirements, which involve substantial operational and financial overheads. By stepping away from this space, Zomato avoids the complexities and costs associated with maintaining compliance, thereby potentially safeguarding itself from regulatory risks.”
Zomato’s u-turn demonstrates that timing is just as important as getting the correct regulatory approvals in hand.
As of this month, 28 other companies hold online payment aggregator licences in India, including Google, Amazon, Stripe, Worldline, Tata and Razorpay.
