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Big box retail and the payment processing industry

Left to themselves, an unchallenged foreign payment processing industry in India would bring about a kind of situation, on par with what would happen if the foreign banks in India were provided with the facility to decide how Indian public sector banks would perform

The big debate on foreign direct investment (FDI) in retail in India proceeds along the lines, largely, of how it will impact the small trader and agriculturist continues. Hectic behind-the-scenes lobbying in Delhi, briefly and barely reported in the media, gives the impression that in some circles this is a done deal. The truth, as always, is that sheer numbers will triumph. In this case, the numbers are controlled by those who would wish to camouflage real intentions.

As always, the stock market is ahead of the curve, and the rapid depreciation in the value of the rupee is one indicator from those who remember the lessons of history in context with selling out the economic strength of a nation to the tunes of “free market” played out again and again by people who come selling trinkets for silver.

But times are different. Some people choose not to be swayed by rhetoric and hyperbole. Notable amongst them being Julius Assange who symbolically announced his understanding of the business of controlling economies and people by placing the logos of MasterCard, Visa, PayPal and Bank of America reversed and upside down on the wall behind him while speaking via video link at the HT Summit held in Delhi recently. Many more, however, choose to stay blind to the realities. Those who do understand the deeper aspects of the payment processing industry which comes along as dowry with the FDI in retail line of business are usually well and truly enmeshed as part of the system to resist its inexorable progress towards domination.

The argument about large retail versus small retailer, supply chain of the Western sort versus dabbawalla options of the Indian sort, and wastage of the Western sort with huge garbage generation versus wastage of the Indian sort which often goes in to trickle down to the poorest, are all with their pros-and-cons. Likewise, big retail of the organised sort is also essential to keep the small retailer groups and their middlemen in check too, simple as that. One is needed to keep a grip on the other, especially when tax evasion of amazingly large proportions is the order of the day in both small and large retail and distribution.

The other big reason why some amount of big box retailer control is needed co-terminus with small retail is basis the way other countries which otherwise go about demanding free trade, handle things in their own countries, and how an emerging India can demand a quid-pro-quo. Once we know the source of the FDI, of course.

  • France, still and always the bright light in the sky for such matters, requires foreign corporates to seek special and very difficult to obtain permits under a 1973 legislation called “Loi Royer”, for any retail or distribution business using space of over 1,500 square metres (1,000 square metres in small towns), and this is usually not provided to foreign companies.
  • Germany has similar strict legislations for all establishments over 1,200 square metres.
  • South Korea adds fertilisers to the list for Japan placed below.
  • Japan does not permit foreign companies of any sort to take part in any form of distribution or retail of all fuels, fresh produce, cereals, lentils, processed food, alcohol, automobiles, spices and herbs, tobacco and milk.
  • The US will speak about freedom of market forces, but the truth is that the big chains control the business so well that any fresh entrant will have to contend with competition of the sort that will simply not permit fresh entrants.
  •  The Arab countries, of course, largely insist on a local partner in everything, who typically has simply got a share of the business and profits without putting in much by way of money or effort.

There must be good reason for all this, right?

It has to be appreciated that apart from the above, there is an even stronger and paramount reason for India also protecting its retail market and distribution business, way beyond the political and social reason of wishing to protect the small retailer, and it has to do with protecting the strength of India's own re-emerging economy and independence. As one
Japanese banker once explained it to me in very brilliant terms, explained in brief here

1) Imagine the retail business of the world being transacted in US dollars like the oil business. When you look at it that way, it suddenly clicks—apart from buying on 180 days credit and selling for cash, the global currency for retail and distribution becomes, once again, is dollar only—like with oil, commodities, metals and more, and other such transactional businesses.

2) The most important part of any economy, whether small shopkeeper, large retailer, huge distributor or even a nation, is the customer list. Giving that away for free or close to nothing to competitor nations, which in effect is what other countries are, is like committing suicide.

3) Our Asian economies are, simply put, sociologically as well as traditionally, for good reasons, designed to function best on the small trader and shopkeeper model, but with some new age best practices on efficiency required. This is where a focus on the laws pertaining to retail and distribution, especially movements across state and district borders, need to be cleaned up—putting both big and small on an equal footing. At least.

In the same context, the big box retailer brings along with her the clear and present danger of the American payment processing industry, represented by not just Visa, MasterCard and American Express, but the shadier and more powerful back-end companies which also increasingly control the global remittance economies and gaming industries. It is just a question of time once the big box retailer moves in before these two factors move in too.

So how does the payment processing industry impact India’s economy, what are the risks, over and above the fact that the float moves into their hands?

The payment processing industry is obviously a very highly complex industry which needs far more effort and space than available in this column to explain, but very briefly they do not bring anything new to the country now that RuPay is almost launched nationally, and it would be very interesting to see the reaction of those who support FDI in retail if RuPay was made compulsory as a preferred back-end for all retail in India. (Back-ends are able to handle other payment processing options like MasterCard, Visa, American Express and China Union Pay, on proper reciprocal arrangements. Just like a non-Indian debit card can and will function at an Indian ATM basis a back-end from the National Payments Corporation of India and an Indian issued debit card will work abroad when the back-end would be from the American trio.(

  • Left to themselves, an unchallenged foreign payment processing industry in India would bring about a kind of situation, on par with what would happen if the foreign banks in India were provided with the facility to decide how Indian public sector banks would perform. The fact that RuPay is being lobbied against in India by the obvious competitors is one simple truth.
  • An ability to take over the role of the central banks in as much as influencing the value of the currency, it’s float and money concentrated in a few specific entities is concerned, is what comes with the payment processing industry the big box retail brings along. This is not a conspiracy theory—this is based on cogent and reliable history, as the fortunes of EuroCard/EuroPay as well JCB Card showed.
  • Extremely close linkages with the global gaming industry and all that goes with it—including rotating ‘hot’ money, influencing all forms of gambling and the higher usage of stored value cards which operate on the “money leaving no footprints” model. Even India’s cash economy, known better as ‘black’ will now be controlled by somebody else, and that is really dangerous.
  • A disregard for laws of the nation they operate in, choosing to follow instead the dictates from the US, for example—shutting down of State Bank of India credit cards in Iran due to US sanctions on GE and Visa, SBI’s partners here. Big box retail has everything to do with this.
  • No room for the low-usage class of society as well as difficult for smaller co-operative banks and others to participate in, and a debt trap of the sort that other countries are already in the grip of, with amazingly high interest rates on delayed payments.

FDI in retail, without keeping many more safeguards, especially in the payment processing aspects than presently thought of? Might as well ask for the viceroy to return, in any case the Star of India still shines over the Viceroy's Palace in Delhi awaiting their glory, now that it seems company is back to making profit in India, and the foot-soldiers left behind await Their Majesties.

“A great civilization is not conquered from without until it has destroyed itself from within.”—W Durant

(This is the concluding part of a two-part series)


Aadhaar work should be stopped, says VS Achuthanandan

Viability of the Aadhaar project has not been found and there has been undue haste in   proceeding with the matter: VS Achuthanandan

VS Achuthanandan—leader of the opposition in Kerala—has made it clear that Aadhaar work should be stopped, according to a report published in the Mathrubhumi. The viability of the Aadhaar project has not been found in its implementation. There has been undue haste in proceeding with the matter. The hasty work in this regard can even affect national security, Mr Achuthanandan said.

The Parliamentary Standing committee has also rejected the UIDAI (Unique Identification Authority of India) Bill. There are no clear objectives on why the database is being compiled, and even within the ruling party there are differences of stance. The government is spending crores on this project, and so far only 8 crore people have been covered. Finally, according to Mr Achuthanandan, the work has no standing as far the law is concerned.

In an earlier statement to The Hindu, the opposition leader from Kerala has said that the Unique Identification number (UID) project, being implemented under the title ‘Aadhaar,' had no justification now the Union home ministry itself had expressed serious concerns about its implications for the nation's security. Home minister P Chidambaram himself was on record that the UID project was not being implemented observing all security norms and that the issue deserved to be discussed by the Cabinet committee concerned. He had also reportedly written to the deputy chairman of the Planning Commission pointing out that anybody could prepare ‘Aadhaar' cards without attracting any cross-checking.

Further, according to The Hindu report, with the home minister and the Registrar General expressing reservations about the project, the misgivings expressed by Mr Achuthanandan on the issue have been proved to be true. Despite widespread opposition, the state government in Kerala was going ahead with the project. Fingerprints and other biometric information were being collected without consent from the citizens. In the case of school students, such information was being gathered without obtaining their parents’ consent.

Professor Rajanish Dass, Indian Institute of Management, Ahmedabad has also severely criticised the government in its implementation of the UIDAI project. The government had announced the creation of the Unique ID Authority of India (UIDAI) to generate the largest IT project of the globe—the Unique ID (UID) project—with an aim to provide a unique twelve digit number to 1.2 billion residents of India. There have been serious debates in nations like Australia, Canada, and the United Kingdom about the viability of implementing national identity policy, given that the chances of misuse of data in a centralized system increases by leaps and bounds and becomes the single point of failure. The total cost of such a programme has been reported, a guesstimate as reported by the Frontline magazine puts the cost of the project (without considering the recurring cost) at around Rs1.5 lakh crore. The cost of failure of such an initiative would be huge for a nation like India which has 27.50% of its population living below the poverty line.
According to The Wall Street Journal article (A Sharma, 2010), “critics question whether the project can have as big an impact as its backers promise, given that identity fraud is but one contributor to India’s development struggles. The civil liberties groups complain that the government is collecting too much personal information without sufficient safeguards. The technology requires transferring large amounts of data between the hinterland and an urban database, leading some to question whether the system will succumb to India’s rickety Internet infrastructure”.

The Unique Identity Project in India is a flagship project as being highlighted by the government and is being portrayed as a panacea for all ills that exist in the country. Although time can only tell about the efficiency and efficacy of the project, the very launch of this exercise has made it the largest biometric based identity disbursing e-government project in the globe.




5 years ago

very good

Ram K Kaushik

5 years ago

The Aadhar project of India and unique identification authority of India (UIDAI) have never been considered to be legal and constitutional. Form time to time, experts have been suggesting that Aadhar project and UIDAI must be scrapped.

Indian government, Aadhar project and UIDAI are hiding truth from Indian citizens and are fooling them. However, sooner or later the truth was bound to be revealed.

Besides experts in India now even the home ministry of India has been opposing the Aadhar project and UIDAI.

Neither Aadhar project nor UIDIA have been able to provide the mandatory legal framework under which they can operate. Further, both Aadhar project and UIDAI are openly violating various civil liberties like right to privacy in India.

Realising that Aadhar/UIDAI may be challenged in the Indian Courts; a fa├žade was created in the form of National Identification Authority of India Bill 2010 (Bill).

However, according to experts like Praveen Dalal, a Supreme Court lawyer and leading techno legal expert of India, even after the Bill becomes and applicable law, both Aadhar and UIDAI would remain “Unconstitutional”.

None can doubts that fake UID cards has made Aadhar project further vulnerable to misuse.

What is surprising that our Prime Minister Dr. Manmohan Singh has failed to take notice of these unconstitutional and illegal irregularities in the functioning of Aadhar project and UIDAI.


5 years ago

If Money life trust claims to work for removing evils in society then before printing allegations by political people on a project spearheaded in unselfish manner by one of the most honest personalities left in the Govt , pls ask for alternative and correction required. If UID is not 100 % effective but only 50% still worthwhile to spend that money which other is looted by corrupt peoples.



In Reply to Kapil 5 years ago

Huge scams take place in spite of the existence of honest people here and there.
Why a 12-digit number is needed for a citizen of India ? Is it to be just a prisoner number or will there be any benefits ensuing worth the cost involved?


In Reply to rprtr 5 years ago

small correction pls......the UID number would be or is issued not to citizens but to residents of India.
@kapil....we already have 15 different kind of IDs in India. If there is some problem, then we must rectify or correct it and not create another one with several loopholes.


In Reply to Nandan 5 years ago

This is more for the benefit the government rather than for the good of the residents of India. The number of ids the people have are sufficient for their use. But the govt. wants to spy over every deal of the residents, depriving them of their freedom and privacy.

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