Why did Uber India opt for a Paytm wallet instead of creating a native wallet?

No that is not the case . Uber chooses Paytm because - RBI made it mandatory to follow its http://www.thehindu.com/business/Industry/twostep-authentication-must-for-credit-cards-rbi/article6345330.ece in August. The central bank asked companies allowing online payments to follow a process that involves the customer manually imputing in a password, which is aimed at making transactions more secure. And That extra step is something startups like Uber aren’t happy about. In ahttp://blog.uber.com/2FA, the company said: India’s regulations require every transaction made with an Indian credit card, no matter how small the amount, to include two-factor authentication (2FA). While this requirement is intended to provide more security for consumers, it is an antiquated solution that is cumbersome for consumers and stifling for businesses across India. To comply with RBI’s guidelines, Uber is now asked Indian users to http://qz.com/296483/indias-credit-card-rules-just-took-the-ease-out-of-uber/, a mobile wallet it partnered with in November. Customers have to load money on to the wallet and pay their bills through it. In other parts of the world, customers simply walk away from their Uber ride and their credit cards are automatically billed.

Getting a license for a Wallet (Semi closed loop program) from RBI is not very easy. The company must have solid background & history of previous transactions cause RBI has reduced issuing the numbers of licenses for such semi closed loop programs and RBI audits all previous transactions and checks for transparency in the same. After this if RBI is convinced then it might give you a license. Last year only 3 companies got similar licenses. So it was a feasible business decision for Uber to tie up with Paytm. In a wallet you can store money so that the ride can be billed from your wallet which cannot be done in a CC gateway so Uber has not problems getting paid for the ride also the customer is saved from the hassles of paying after the ride has come to an end. Also its easier to pay using a wallet with having multiple payment options in a single umbrella.

I cannot speak to #1 and #3 --> those are specific and possibly confidential to the company. #2 --> In order to leverage local acquiring any company has to have a local entity. Connecting to a local credit card gateway is only part of the solution. This simply allows the company to connect the dots between their app->gateway->acquiring bank. The real crux of the matter is having a local merchant account at a local acquiring bank, which as it stands is not possible for a non-Indian company.

Anuj, while you are correct about the need to switch to wallet based payment instead of credit cards, Vinit is answering the question why did Uber not create its own wallet instead of using paytm wallet. Does anyone know the complexities if I want to create my own wallet. Creating a wallet is like printing currency and I am not sure how RBI is allowing this.