Winning credit against cards IT’S CONVENIENCE
DIGITAL WALLET In a country known to avoid credit cards, digital wallets have stepped in to replace cash, and are also serving the unbanked
NEW DELHI: Digital wallets, which have been around since 2006, have started to take off in the last 12 months, thanks in part to the convenience they offer, their integration with e-commerce and other services, and a change in consumer behavior. Wallet companies such as Paytm (run by One97 Communications), MobiKwik (One Mobikwik Systems), and Oxigen (Oxigen Services India) have also raised massive venture capital, which helps them lure customers with cashback incentives.
The most popular wallets, like the ones mentioned above, are semi-closed – with which you can transact with merchants but not withdraw money. There are also closed wallets, which are for payments on a single platform, such as a cab aggregator. Then there are open wallets, like M-pesa by Vodafone India, which allow you to withdraw money as well as make online transactions.
They, especially the semi-open kind, are stepping into the breach left open by a Indians’ reluctance to use credit cards, and the banking system’s failure to bring large parts of the population into its fold. Wallet use jumped from `8,100 crore in 2013-14 to `21,100 crore in
2014-15.
Wallets started with offering consumers a way to make small retail payments, such as phone recharge. But they have travelled much beyond. Paytm, the largest digital wallet company by far, is accepted by e-commerce outfits, kirana stores, milk-cooperatives, auto and taxi drivers, parking operators, cinema theatres, colleges, and many others. “Currently, we have 132 million wallets. We are targeting 500 million by 2020. We have very aggressive plans to get four million offline merchants on our platform by the end of 2017. Our focus is to build the largest payment network in this country,” says Kiran Vasireddy, senior vice-president, Paytm.
The confidence about building “the largest payment network” comes from the payments bank licence that Paytm, and 10 other companies, were given last year by the Reserve Bank of India. With that it takes early steps towards financial inclusion -- the process to bring the large mass of unbanked population into the financial system. A payments bank will provide basic savings, deposit, payment and remittance services but not give loans.
This could be just the beginning. “As more and more transactions go digital, there will be tremendous value added in terms of security, providing a customer relationship management software, and customer data options. Our objective is to ensure we act as an operating system to power all these,” said Govind Rajan, chief executive officer at FreeCharge, the payments arm of e-commerce marketplace Snapdeal. It launched its own wallet last year.
MobiKwik, which launched in 2013 and has raised $87 million, is also betting on growing as a platform for financial inclusion. It recently conducted a pilot to offer micro-loans to some of its wallet users. “In the future, when people want to take loans, when they want to invest in funds, take insurance, we won’t be the best company to create these products for them, but we will be the best company to match providers with consumers based on credit history and trust,” said Upasana Taku, co-founder, MobiKwik.
It isn’t just start-ups that operate digital wallets, the State Bank of India, ICICI Bank and HDFC Bank, too, have woken up to the opportunity and begun offering open wallets to their consumers, but they haven’t grown as much as the start-ups.
For banks, wallets are one of several products. They won’t have the razorsharp attention that wallet-only companies can give their users and products. “Strict know-your-customer norms, unwelcoming staff, and the absence of a strong brand have pushed away from banks a segment that never understood what a bank account is. This is where standalone wallet service providers have hit the jackpot. They can easily lure the customer base of traditional banks,” said Neha Punater, partner, Fintech, KPMG in India. For more stories and data, go to http://www.hindustantimes.com/ smart-phone-survey