Why America could miss out big time on India’s fintech revolution

There’s an old trope in the West that India is like Indian trains — exotic, lurching and slow.

But tropes can be bad as a business strategy — and this trope is causing American companies to miss out on Indian moonshots and trillion-dollar opportunities.

In this article I’ll focus on fintech, which is leapfrogging in a way traditional banking never could. Morgan Stanley expects India’s digital payments penetration to increase from 5 percent today to 20 percent, and the e-commerce market to reach $200 billion, with 475 million e-commerce shoppers, adding up to a GDP upwards of $6 trillion — all by 2027.

Just like India’s mobility revolution. Most Indians went from having zero connectivity to being on the mobile internet without ever seeing a PC or even a landline. India now has 800 million mobile phone users with 430 million having internet connectivity. According to Morgan Stanley, the number of internet users is expected to grow to 915 million by 2027.

The same leapfrogging is unfolding in payments. While the internet changed how Indians communicate, read news and get entertained, it didn’t change how they transact. As this graph shows, the number of credit and debit cards in India has grown only incrementally. Even top-down initiatives by the government, such as the controversial demonetization decision, struggled to reduce reliance on cash.

Debit card usage spiked in November and December 2016 after demonetization. But it looks like it’s returning to levels below credit card transactions again.

What does this have to do with America? And who could the big US of A lose out to?

China. Because China has already tackled the two biggest obstacles to digital payments — building infrastructure and changing consumer behavior in its own backyard and front yard. By developing a rich ecosystem with strong network effects, WeChat has become the Operating System of China. Alipay has done the same with commercial payments. In 2016, China’s digital payments were already 50 times America’s. Alibaba and Tencent understand ecosystems better than anyone else in the world, including American companies.

And now China is showing the…

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