San Francisco-based Uber, offering ridesharing service connecting riders and driver through its own smartphone app, is in talks with domestic firms providing digital wallets and payment gateways to become compliant with local regulations, as reported by Economic Times.
Founded in 2009 by Travis Kalanick, the firm was recently in news for allegedly flouting the rules governing credit card transactions and the Foreign Exchange Management Act (Fema). The Reserve Bank of India shut a loophole last month by clarifying that online payments taking place between two Indian 'residents' cannot bypass two-factor authentication. Besides the additional authentication, the central bank also wanted transactions to be carried out in Indian rupees and not dollars.
Uber stores credit card details of passengers and automatically charges the card once the taxi ride is over without two-factor authentication as it uses an international payment gateway. The RBI has provided companies like Uber time until October 31 to become compliant.
Experts believe that while these partnerships will help Uber become compliant, it could open up a lot of other issues. "Consumers do not like keeping significant amounts with wallet service providers. That will be a challenge," said Rahul Chowdhri, Partner, Helion Venture Partners. Helion is an investor in taxi aggregator TaxiFor-Sure, which has introduced electronic card swipe machines in the taxis on its network. While RBI allows users to store up to Rs 50,000 in semi-closed wallets, about 50 per cent of all telecom wallet users keep less than Rs 50 in their accounts, according to industry estimates. Bad internet connectivity in India is another issue.
Goldman Sachs and Google Ventures backed Uber has been facing a backlash from local taxi operators and regulators in many countries including Germany, Singapore and lately India. In August, Indian radio taxi providers, including Meru Cab, Easy Cabs and Mega Cab, filed a complaint with the RBI alleging foreign exchange violations by the American firm.