Mo­bile wal­lets don’t see red even af­ter UPI launch

The Financial Express - - MONEY & MARKETS - Prabhu Mal­likar­ju­nan

Ben­galuru, April 29: When the Na­tional Pay­ments Cor­po­ra­tion of In­dia (NPCI) launched the uni­fied pay­ment in­ter­face (UPI) ear­lier this month, there were ap­pre­hen­sions that it would kill the busi­ness of mo­bile wal­let com­pa­nies such as Paytm, Ox­i­gen, Mo­bikwik and others. How­ever, in­dus­try ex­perts claim oth­er­wise.

Wal­let com­pa­nies are likely to be ben­e­fi­cia­ries of UPI, con­sid­er­ing the use cases they have, friendly user in­ter­face (UI), user ex­pe­ri­ence (UX) de­signs, and also be­cause of lower trans­ac­tion costs once UPI is adopted in large scale.

Dilip Abse, chief op­er­at­ing of­fi­cer, Na­tional Pay- ments Cor­po­ra­tion of In­dia, told FE, “Mo­bile wal­let have many use cases and that's why they went on to be­come pop­u­lar even when we had in­ter­net bank­ing and card pay­ments. Just be­cause UPI is in, doesn't mean wal­lets would die. The wal­lets are ac­tive be­cause of dis­count­ing, con­ve­nience, val­ued-added ser­vices and other fac­tors that they of­fer. The can­ni­bal­i­sa­tion im­pact (of UPI) may come only af­ter five years.”

As a first step, UPI has been en­abled only for banks. But the ar­chi­tec­ture of the UPI al­lows even non-bank­ing en­ti­ties to get in­volved as and when per­mit­ted. Abse said de­pend­ing on the adop­tion rate, NPCI would make a rec­om­men­da­tion to the RBI to in­clude wal­let com­pa­nies as pay­ment ser­vice providers (un­der UPI), which are now re­stricted only to banks. This may fur­ther strengthen the com­pe­ti­tion and help wal­let com­pa­nies.

Dig­i­tal wal­let com­pa­nies say UPI will make it eas­ier and cost ef­fec­tive for con­sumers to load cash onto the wal­let, and that in turn would ben­e­fit the wal­let pay­ment ecosys­tem.

Paytm, with a 120 mil­lion wal­let user base, claims to have about 90 mil­lion monthly trans­ac­tions worth Rs 700750 crore. In 2015, the com­pany had spent Rs 588 crore as cash back.

Ox­i­gen with 20 mil­lion users claims to clocks trans­ac­tions worth Rs 450 crore ev­ery month. Mo­bikwik with 30 mil­lion wal­let users claims to have around 5 lakh trans­ac­tions worth be­tween Rs 50-60 crore per month.

Bipin Preet Singh, founder and CEO of Mo­bikwik wal­let, said, “UPI is just an in­fra­struc­ture and not an end-user app. To­day, the suc­cess of any fi­nan­cial sys­tem de­pends on both, the fron­tend and back-end sys­tem. Banks have to build best of apps, or up­grade to use it ef- fec­tively. Whether that will hap­pen or not sure. Be­cause many of their users to­day are not us­ing their wal­let, but us­ing other in­de­pen­dent wal­lets. There­fore, the key is the con­sumer adop­tion and also the mer­chant adop­tion.”

With UPI in­fra­struc­ture, wal­lets com­pa­nies like Paytm and Ox­i­gen ex­pect cash load­ing cost to re­duce by 60-70% , as it re­duces de­pen­dence on the pay­ment gate­way plat­form.

“Apart from re­duc­tion in cash load­ing cost, higher UPI adop­tion would also bring down our cus­tomer ac­qui­si­tion cost sub­stan­tially, as banks would now be driv­ing more peo­ple to get on­line and trans­act us­ing smart­phones,” Nitin Misra, vi­cepres­i­dent for prod­ucts, said.

Af­ter the launch of UPI, pay­ment gate­ways like Cit­rus and PayU are look­ing at al­ter­na­tive rev­enue options and to part­ner with banks in mak­ing more mer­chants and con­sumers adopt UPI.

San­deep Moonka, head of bank­ing at PayU, said, “Our di­rect busi­ness is marginally im­pacted. But go­ing for­ward, we would look at ways to en­gage with banks in ex­pand­ing the adop­tion of UPI. We would play the role of a mid­dle­men be­tween banks and mer­chants, di­rectly or in­di­rectly and add more mer­chants on to the plat­form.”

Shiv Ku­mar Bhasin, chief tech­nol­o­gy­of­fi­cer­atS­tateBank of In­dia, echoed sim­i­lar views and said banks will use ser­vices of third-party play­ers to add more mer­chants to ac­cept the UPI as a pay­ment plat­form.

Wal­let user base

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