Finance

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Serves you right, Mark Zuckerberg.

Facebook Inc. lost so much time peddling a controlled internet-lite to India's poor, it let Google score a lead where it truly matters: digital payments in the only billion-plus-people market open to Western tech firms.

This week Google launched Tez, which means "fast" in Hindi, as an online payment application custom-built for the nation. Early users complained of glitches, but those are fixable. What's important is that by hitting the market before Zuckerberg's planned WhatsApp payment method, Google got the Indian government's blessing for an innovation that could become an emerging-market standard: audio QR.

Quick response codes have put the Chinese digital payments market far ahead of Western counterparts, and Singapore wants to copy the model. China's revolution was spearheaded by Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. The homegrown BAT trinity used its control of e-commerce to beat both cash and plastic on convenience and costs.

With that battle already lost for Western tech firms, the war has moved to India where there's no dominant homegrown player, nor any regular state policing of the internet. This is where Facebook, Alphabet Inc.'s Google and Amazon.com Inc. will spar for acceptance of ideas they can then take to other emerging markets.

India is the perfect battleground in more ways than one. Mobile data charges are plunging, thanks to Reliance Jio's bold bid to wrest market share from entrenched wireless operators. And the political environment is conducive to experimentation. The present government, having already drained 86 percent of the country's cash once, badly needs to show a behavioral shift away from physical currency before the next election. A card-based system is simply too expensive to work in remote villages.

On the Clock
The amount of currency in circulation has bounced back since India's demonetization, making it all the more imperative to move fast when it comes to digital payments
Source: Bloomberg

Enter audio QR. Even a cheap smartphone with a mic and a speaker can generate a scrambled audio burst picked up and decoded by another basic smartphone in the vicinity. With all lenders on a mobile-based unified payment interface that Google is also tapping, debiting and crediting bank accounts becomes child's play.

Well, maybe not quite. Google still has to ensure security, and make the technology work in noisy bazaars. But CEO Sundar Pichai has got the basics right: Just as the internet in emerging markets bypassed the desktop computer, users in a multilingual country with less than full literacy are more likely to use their voices, not fingers, to interact with their mobile phones. That's why billionaire Mukesh Ambani, the one building cheap Jio phones, wants them to be wholly voice-operated in most Indian languages.

You Called?
Mobile phone users in India are approaching the 1.2 billion mark
Source: Bloomberg

Google's Tez doesn't offer as many language options yet as BHIM, the Indian government's own payments app. New Delhi launched that app after its November demonetization caused an acute cash shortage. But that was an overkill -- the government should have stopped at just making the interface available to the private sector. Apps only take off when somebody pays people to use them.

Following in the footsteps of Paytm, the popular Indian digital wallet backed by Masayoshi Son's SoftBank Group Corp., Google is doing just that. The prize it has in mind -- as with everything else it does -- is advertising. A merchant that accepts a Tez payment is winning a customer it can target later with customized offers. Paytm, meanwhile, has become a bank, directly accepting interest-bearing customer deposits.

It's too early to say if Tez will be a success, or if audio QR will become a dominant standard in Indian online payments. Nandan Nilekani, an Indian tech billionaire who went on to become the government's digital messiah, said last year that the state-built payments interface would alter banking just as WhatsApp has forced slothful telecom firms to change.

That WhatsApp moment, as Nilekani dubbed it, is coming via Google.

Zuckerberg may have lost first-mover advantage, but the popular messaging systems he owns are crying out to be used for something better than baby pictures and fake news.

Outside of China, emerging-market digital payments are still anybody's game. Mark Zuckerberg, get your skates on.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Hong Kong at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net