INDIA’S START-UPS TAKE ON BIG TECH IN FIGHT FOR MARKET DOMINANCE
▶ Tussle offers a lucrative opportunity for companies intent on winning over country’s growing base of internet users
This month, Paytm, one of India’s biggest start-ups, challenged the dominance of Google by launching its own mini app store.
The FinTech took the ultimate step after it was temporarily removed from the Google Play app store for reportedly breaching Google’s policies.
“App developers are effectively dependent on a very giant monopoly, namely Google,” Paytm’s founder and chief executive Vijay Shekhar Sharma said during an online conference to announce the “mini app store”. He likened Google to “a toll collector”.
Mr Sharma is not the only one feeling the need to stand up to a bigger rival.
More than 95 per cent of smartphones in India use Google’s Android operating system, and technology start-ups have been angered by the company’s plans to charge a 30 per cent commission on purchases made through its app system, a fee which was due to come into effect this month.
In response, dozens of Indian start-ups are banding together to lobby against the dominance of Big Tech. In at least a temporary victory for these companies, Google extended the deadline by six months to give Indian companies enough time to comply with its new billing policy.
The search engine company said earlier this month that it was “mindful of local needs and concerns” and had subsequently decided to set up “listening sessions with leading Indian start-ups to understand their concerns more deeply”.
The tussle between local startups and Big Tech comes as the country of 1.3 billion people offers a lucrative opportunity for companies that are intent on winning over its large and growing base of internet users.
Analysts say that local startups that are backed by global investors are in a strong position to fight back.
“India as a country has long used western civilisation as a frame of reference,” says Suraj Ravi, the founder of QWR, a technology start-up in Mumbai.
“But when it comes to being a digital society, we are actually giving them a tough fight.
“We have enough technology that takes away the entire requirement of a middleman. We need to have our own system that is run by us, with an Indian solution.”
Nikhil Kamath, the co-founder and chief investment officer of asset management company True Beacon and FinTech fund and incubator Rainmatter, says India was long seen as a back office for the world’s information technology needs.
However, “since 2010, the prominence of Indian technology companies, which aim to create consumer-centric products, [such as] Paytm, Flipkart and Zomato is on the rise”, he says.
“They are competing with multinational companies in the largest consumer market.”
Bengaluru-based Flipkart is one of the major success stories out of India that took on a dominant global player.
Like its American rival Amazon, it started out as an online bookseller and was launched by two young Indian entrepreneurs, Binny Bansal and Sachin Bansal, in 2007.
The company, which was set up out of an apartment in Bengaluru with just a few thousand dollars, went from strength to strength to compete as an alternative online marketplace to Amazon.
In 2018, Walmart acquired a 77 per cent stake in Flipkart for $16bn. As of 2019, Flipkart was the largest online retailer in India, with a market share of 31.9 per cent, ahead of Amazon’s 31.2 per cent share, according to data from market research company Forrester.
“In any consumer segment, a company which can be transparent, customer aligned and make lives easier will definitely succeed,” says Mr Kamath.
This is true of ride-hailing app Ola. Also emerging out of Bengaluru – a city in south India often described as the country’s answer to Silicon Valley – Ola has gone head to head with Uber. The two rivals claim they have the lead in India’s ride-hailing market.
Uber said in February that it had a market share of more than 50 per cent while SoftBank-backed Ola said at the time that it was the largest platform, with more than 200 million customers.
However, experts point out that most major start-ups in India are inspired by their Silicon Valley rivals, raising concerns about innovation.
“In some ways, that can prove to be a hindrance,” says Utkarsh Sinha, managing director of Bexley Advisers, a consultancy in Mumbai that supports technology and media companies and investors in early funding rounds.
“However, paradoxically, I feel that has been good for India. The growth of global platforms in India helped seed the community of creators that are going on to generate ‘unicorns’ [start-ups with $1bn-plus valuations] today. The presence of Silicon Valley giants in India has served as the nucleus to create Indian innovators.”
Praveen Tyagi, the founder of Indian education technology app STEP, says “global companies have offered a base for growing individuals and Indian companies to come forward and explore these opportunities for growth and success”.
Many have had immense success as well. Paytm, for example, has managed to fend off competition from Google Pay to become the largest operator in India’s digital payments space that is valued at 2 quadrillion rupees ($2.7tn), according to a report released in August by consultancy RedSeer.
The FinTech controls about half of the local payment market while Google Pay has a market share of 10 per cent, the report says.
RedSeer explains that Paytm’s extensive growth has been helped by its presence in India’s small towns and cities, which has allowed it to add millions of shopkeepers to its platform.
“Paytm has the highest topof- mind recall and unaided awareness among merchants,” according to RedSeer.
It is the “most used app” among the merchants, with 68 per cent of those cited in RedSeer’s study saying they used it to accept payments.
Like all of India’s major technology start-ups, Paytm has attracted substantial funding from abroad to help fuel its growth and is backed by investors such as SoftBank, Berkshire Hathaway and Ant Financial.
“These are not small start-ups – they have huge investments from [foreign] private equity investors,” says N Raja Sujith, partner and head of the South Indian branch of law firm Majmudar and Partners.
He explains that if companies such as Paytm lobby against Big Tech, the government will have to listen to them.
However, Google is also an important investor in India’s technology space, having committed to inject $10 billion into the sector over the next five to seven years. This includes $4.5bn invested in Indian conglomerate Reliance Industries’ digital arm, Jio Platforms, for a 7.73 per cent stake in July. Facebook has also invested in Jio Platforms.
India’s technology players and Big Tech are heavily intertwined and this is why, Mr Sujith explains, the government and the major players will probably want to “find a middle-path solution” to the current dispute that has flared up over Google’s new app billing system.
“In certain areas, like [the] Google and Apple app stores, you don’t have a competitor at all,” says Mr Sujith. “There is a real dominance due to their technological advancement.”
Paytm’s mini app store is no comparison to Google Play, according to experts. However, the fact that a local start-up dared to take on a competitor with their own home-grown alternative shows how India technology start-ups are challenging their bigger rivals.
In any consumer segment, a company which can be transparent, customer aligned and make lives easier will succeed
NIKHIL KAMATH
Co-founder of True Beacon